With the Permian possibly falling short of expectations, the U.S. shale boom may not be the panacea to keep prices relatively low at a time OPEC is restraining supply and geopolitical risks threaten more supply disruptions.
In today's global oil market, price movements, in either direction, are largely dependent on OPEC's actions and verbal intervention. Current political and market dynamics make it clear that shale was never a panacea.
American consumers plan to change their driving habits throughout the summer due to increased gasoline prices.
Oil prices are currently underpinned by unplanned supply outages, OPEC manipulation, geopolitical uncertainty, limited spare capacity, rising demand, and speculative buying.
OPEC officials warn that underinvestment may lead to a price spike, but major oil producers do not have a strategy to meet longer-term demand growth.
Circumstances in the oil markets are expected to change, perhaps dramatically, early next decade. While U.S. production is expected to grow by a massive 2.5 Mbd in 2018-19, increases will thereafter slow considerably.
The divergence in shale forecasts stems from differences over macroeconomic assumptions, price expectations, the supply chain outlook, and productivity projections.
A series of recent deepwater discoveries has demonstrated that the offshore oil sector is beginning to rebound after years of subdued activity, despite increasing interest in onshore shale drilling.
Since the price downturn, companies have prioritized digital technologies, artificial intelligence, automation, robots and drones, connectivity, and data analytics in their budgets.
The remarkable shift in U.S. production should be celebrated, but it is also important to remember how much surrounding energy security has not changed. More than 90 percent of the transportation is fueled by petroleum, and consumers are still vulnerable to price swings and supply outages on the global market.