The Student News Site of Texas A&M University - College Station

The Battalion

The Student News Site of Texas A&M University - College Station

The Battalion

The Student News Site of Texas A&M University - College Station

The Battalion

Advertisement
Texas A&M University System Chancellor John Sharp attends the Class of 1972 50-year reunion in Kyle Field on April 20, 2022.
A&M System’s Title IX director suspended after supporting Biden's Title IX changes
Nicholas Gutteridge, Managing Editor • May 23, 2024
Advertisement
Mexico fans react after Mexico F Julián Quiñones 73rd-minute goal during the MexTour match between Mexico and Brazil at Kyle Field on Saturday, June 8, 2024. (Kyle Heise/The Battalion)
‘The stuff of dreams’
Ian Curtis, Sports Reporter • June 11, 2024

As soon as the Mexico-Brazil soccer match at Kyle Field was announced, Jacob Svetz and Caitlin Falke saw an opportunity.  The match was scheduled...

Advertisement
The Fighting Texas Aggie Band performs at halftime during Texas A&Ms football game against ULM at Kyle Field on Saturday, Sept. 16, 2023.
Gridiron glory to multi-event marvel
Shalina Sabih, Sports Writer • June 7, 2024

Special teams: Special events  “My favorite thing about an event is seeing the people come into the stadium and seeing their excitement...

Kennedy White, 19, sits for a portrait in the sweats she wore the night of her alleged assault inside the Y.M.C.A building that holds Texas A&M’s Title IX offices in College Station, Texas on Feb. 16, 2024 (Ishika Samant/The Battalion).
'I was terrified'
April 25, 2024
Advertisement
Chris Hemsworth as Dementus in Furiosa: A Mad Max Saga.
Review: ‘Furiosa’ is a must-see
Justin ChenJune 4, 2024

My jaw dropped open in 2016. Rarely in life does that happen, but the viewing experience of “Mad Max: Fury Road" was something to behold....

Texas A&M pitcher Chris Cortez (10) reacts during Texas A&M’s game against Oregon at the NCAA Bryan-College Station Super Regional at Olsen Field on Saturday, June 8, 2024. (CJ Smith/The Battalion)
One step away
June 8, 2024

Black Gold: Professors discuss state of world oil market

The MSC Wiley Lecture Series hosted two speakers on Thursday evening for a lecture titled “Under Pressure: Oil Prices, OPEC and Fracking.”
While low prices for oil and gas prices have been a welcome relief for consumers as of late, they have created turmoil in the global market.
“Oil is a global business,” said Jim Krane, Wallace S. Wilson Fellow for Energy Studies at Rice University’s Baker Institute for Public Policy. “What we’re doing here in this country has a global impact. The story behind this drop in oil prices and big supply story is complex and involves balancing myriad sources of supply with equally myriad sources of demand.”
Head of the Department of Petroleum Engineering at Texas A&M Daniel Hill said the United States is producing way too much oil in the wake of the fracking boom, which has contributed to the drop in price. He cited the Eagle Ford reservoir and Permian Basin in South Texas and the Bakken reservoir in North Dakota, each producing upwards of one million barrels per day, respectively.
“U.S. oil production for the last 25 years has experienced a long decline,” Hill said. “Oil production has been declining since 1971 until about 2005 when shale activity began. There’s been an amazing increase in the production of crude oil.”
Hill said the excess supply of U.S. oil, paired with production spikes in Brazil and African countries such as Algeria and Nigeria has further affected the price.
Krane said the drop in price could also be attributed to the actions of the Organization of Petroleum Exporting Countries, OPEC, specifically Saudi Arabia.
In an OPEC meeting on Nov. 27, Saudi oil minister Ali al-Naimi took oil off the market and forced prices back up. Krane said there are three possible reasons why OPEC behaved this way.
The first, Krane said, is they wanted to help the global economy. Krane said global economic growth wasn’t as strong as OPEC wanted to see, especially in China and other parts of East Asia.
“OPEC gets most demand from East Asia,” Krane said. “That is the growth market for them and they tend to look pretty closely at that part of the world.”
The second reason, which Krane said is likely the true reason for OPEC’s behavior, is a need to protect market share. Krane said this was also a result of geopolitics.
With oil production rising in non-OPEC countries such as the US, Canada, Brazil and Nigeria, Krane said the Saudi’s didn’t want to see further new supply of oil coming onto the market.
Krane cited a quote from Naimi himself, where he justified raising production. Naimi said if they reduce outputs, Russia, Brazil and the U.S. shale producers would take their market share.
“The Saudi’s didn’t see reason to take supply off the market when non-OPEC countries would increase production and fill that gap,” Krane said. “They would be relinquishing their market share to these non-OPEC countries.”
Krane said shale is becoming the new swing producer in the market for oil, meaning it adjusts its production to balance markets and keep price volatility out of global markets. This is due in part to North American shale producers being among the first to react to the market.
Reiterating the importance of the oil and gas industry, Hill said, according to a forecast produced by Exxon Mobil, oil and gas will comprise 60% of the global energy mix by the year 2040.
“That’s a little more than it is right now,” Hill said. “The actual volumes are even larger.”
Krane finished with some good news, comparing today’s global oil market to conditions experienced during the oil bust in the 1970s.
“Shale is proving to be nimble, it can come back quickly when prices allow,” Krane said. “This isn’t something we saw during the last big oil bust. From 1973 to 1979, big projects couldn’t be taken offline easily, unlike shale. The market was much less price-responsive in the ‘70s.”

Leave a Comment
Donate to The Battalion

Your donation will support the student journalists of Texas A&M University - College Station. Your contribution will allow us to purchase equipment and cover our annual website hosting costs.

More to Discover
Donate to The Battalion

Comments (0)

All The Battalion Picks Reader Picks Sort: Newest

Your email address will not be published. Required fields are marked *