Hitting the Jackpot During Oil-Gas Price Collapse: The Consumer

Abstract

The oil, gas and oilfield services industries are experiencing a ‘commodity cycle’ of monumental proportions. The industries are the victims of success from hydraulic fracturing. Low prices, basement-level rig counts, bankruptcies, back-to-back cuts in capital expenditures, and layoffs are some of the consequences. There's another side to this, which is the impact of lower oil and natural gas prices on consumers. The 2016 annual report for the Committee on Energy Economics and Technology, part of AAPG's Energy Minerals Division (EMD), estimated savings to consumers based on pre- and post-shale era pricing, tied to the single year 2015. The resulting figure is $775 billion, in that year. This astonishing number combines impacts in the U.S and, where documentable, worldwide. It accounts for how hydraulic fracturing first caused natural gas oversupply and price collapse (an additional side-effect being lower costs of wholesale electric power), which led to a focus on higher value oil and liquids-rich plays, which injected 4 million barrels per day into the global oil market after about 3 years, which was the primary driver of the collapse of world oil prices beginning in 2014, which drove down the cost of oil-price linked liquefied natural gas and internationally-traded pipeline gas. 2015 consumer savings add up roughly as follows: (1) US natural gas, residential-commercial-industrial sectors, $37.9 billion per year (B/yr), plus electric sector $48.1 B/yr, (2) US gasoline, diesel and jet fuel, $221 B/yr, (3) global oil, less U.S., principally Canada, Europe, major Asia Pacific countries excl. China and India, $366 B/yr, (4) global natural gas, less U.S. — centered on European pipeline trade, $30 B/yr and (5) LNG, principally top five Asia Pacific countries incl. China and India, $52 B/yr. These estimates do not require cherry-picking to produce an inflated result, but straightforward combination of statistics from U.S. Energy Information Administration, International Energy Agency World Oil Market Report (May), BP 2016 Statistical Energy Review (June), International Gas Union 2016 World LNG Report (April) and its 2016 Wholesale Gas Price Survey (May).

AAPG Datapages/Search and Discovery Article #90266 © 2016 AAPG Pacific Section and Rocky Mountain Section Joint Meeting, Las Vegas, Nevada, October 2-5, 2016