Russell Gold, senior energy reporter with the Wall Street Journal and inaugural UT Energy Fellow, provided his perspective on the collapse in oil prices and what he sees as “an epochal moment” for the world of energy in an engaging keynote address delivered during UT Energy Week.
Gold, author of the book “THE BOOM – How Fracking Ignited the Energy Revolution and Changed the World,” said many of the same forces that contributed to the oil boom of a few years ago are at play today during the current bust “and will continue to shape energy going forward.”
The collapse in oil prices was brought on by a confluence of factors, he said, including a miscalculation by OPEC about the how oil producers would react to an initial drop in prices. Moreover, Saudi Arabia decided to continue its production, rather than cut output to counter the effects of lower prices, as it had done in the 1980s. Other nations compounded the oversupply by following suit, and the collapse was on, Gold said.
“If your basement is flooding, you turn off the water,” he observed. “But that hasn’t been what the oil market has done.”
As a result, big oil producing nations are fighting to hold on to their market in a desperate attempt to retain market share, Gold continued, including private companies in the West who are “scrambling to shore up their balance sheets to prepare for a long period of low prices.”
“The old adage that oil in the ground is worth more than money in the bank may not necessarily be true anymore,” he noted.
American oil companies are among those gravely concerned about the future demand for oil and oil products, Gold said. And while the worldwide oil supply won’t dwindle in the next 100 years, eventually demand for oil will lessen, for a variety of reasons. Among them: governmental action to reduce carbon emissions and/ or incentivize an alternative transportation market.
“The oil industry itself has begun to see the beginning of the end,” Gold said.
“I think we’re at a place in society where we’d gladly take an alternative if it was available,” he added. “This is not a fringe sentiment anymore.”
“We’ve fallen out of love with fossil fuels.”