First Oil: What a difference a year makes

Last year at this time, we at World Oil released our initial forecast for global E&P, and Covid seemed to be declining. Simultaneously, the state of Texas experienced its worst bout of winter weather in many decades. At that time, the WTI spot price was in an acceptable range between the high $50s and low $60s. And we were predicting small-to-moderate drilling increases across the board. 

Fast-forward to today, and the picture is noticeably improved. Covid is still around but definitely on the decline. Texas has not had winter weather approaching last year’s mess. Spot prices are high enough for everyone to make a profit, and then some, averaging lately in the high $80s to low $90s (perhaps too high). And we predict more substantial double-digit drilling gains for 2022. Of course, there are problems in Ukraine and Canada, discussed farther down in this column. But first, some snippets about this year’s forecast. 

In the U.S., we expect drilling to improve 20.1%. Primary factors are demand at pre-Covid levels in 2022, coupled with a lack of surplus production capacity, due to underinvestment. Every region in the U.S. should experience a double-digit drilling increase. Details begin on page 25. 

In Canada, industry indicators have shifted to a positive outlook for the first time in many years. But politics have cast a pall over any potential turnaround. There is still the federal government’s almost singular focus on eliminating fossil fuel dependance and dismantling the industry that has driven the country’s economy. For the full Canadian picture, see page 42. 

Internationally, we see activity jumping 16.1% higher, with all eight regions posting moderate-to-large increases. The Middle East, the Americas, Africa, and the FSU will lead the way. For the international details, see page 36. 

Ukraine. As this issue was finished, Russia launched an incursion into Ukraine. If Russia continues to invade, there could be many casualties and a crashing of Ukraine’s economy. But the effects will be felt far beyond Ukraine. 

Consider the effects on European energy supplies, where so many countries (particularly Germany) depend on Russian natural gas, as well as oil. Just imagine the price spikes and supply shortages that might ensue. And the effects, particularly high prices, will be felt in the U.S. and Canada to the detriment of consumers, thanks to the policies of Joe Biden and Justin Trudeau. They have emphasized renewables and environmental primacy over energy self-sufficiency that harnesses oil and gas and enhances national security. 

Trudeau’s tyrannical folly. As this column was being written, Canadian Prime Minister Justin Trudeau had invoked the country’s Emergencies Act to break the Freedom Convoy and its accompanying truckers’ protest of government mandates. Nearly 200 truckers and other associated people were arrested by Ottawa police, who also towed about 100 vehicles. Trudeau said these actions were necessitated, because the truckers were blocking public access and commerce. Indeed, this editor will support the notion that the truckers’ methods, at times, were inadvisable and got in the way of their message. 

Yet, Trudeau’s actions also were inadvisable and extreme. He obviously missed the truckers’ message (or ignored it), which was simply that they want an end to federal government overreach, and they’re tired of being told what to do, all the time (as in mandates). Whether you agree with that message or not, Trudeau could have defused the situation (and the truckers might have gone home without physical force), if he had simply gotten off his high horse and talked to the truckers. As the UK’s legendary wartime prime minister, Winston Churchill, used to say, “Courage is what it takes to stand up and speak; it’s also what it takes to sit down and listen.” Unfortunately, Trudeau did not want to listen—perhaps he thinks he’s intellectually better than blue-collar folks and believes he’s on the “smart” side of the issues. If only that were true.  

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com