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Consumption and Pricing of Oil & Gas - The Future Revealed

Forecasting the future prospects of oil and gas markets for long-term projections are typically unreliable. More importantly, understanding where, how and why those forecasting projections are incorrect is the foundation that allows for the discovery of what is necessary, rather than sufficient, determinants within the oil and gas global community. Most people within the financial sector and/or the oil and gas sector have an opinion or “prediction” regarding the long-term sustainability of oil and gas, however, rather than the focus of forecasting projections being the when and how much the market will increase, it is more beneficial to understand how the structure of the market works on a global level by looking to demand. When the market is treated as a global community rather than a focus on regions, it no longer has the primary concern and/or goal to determine price but rather looks to the economies of other countries and their demand to then be able to ascertain what drives that demand for both short and long-term tolerance within the market. Essentially, demand will increase as economies increase. Therefore, looking to economies of other countries, especially those with higher demand in the last 20 years, will dictate the trend of future demand for those countries, and the U.S.

Per Dr. Kenneth B. Medlock, III, a nationally recognized expert on natural gas, oil and gasoline markets who attended Rice University’s James A. Baker III Institute for Public Policy, the energy requirement per country is the highest in China, India, U.S., Saudi Arabia, Iran, Russia, Germany, and the ASEAN countries, which is who will drive up demand for oil and is forecasted to peak in the mid 2050’s, whereas natural gas will continue to grow in demand beyond 2070. However, a resource such as coal will, most likely, be dependent on whether China switches away from or institutes stricter environmental controls, as China’s infrastructure has been shaped around coal and lax environmental regulations.

Furthermore, though U.S. shale oil and gas resources lead the way, there are other frontiers that are currently being explored and researched significantly, such as heavy oil, oil sands, deep water exploration, the Arctic, and non-U.S. shale-plays; and, meanwhile, the long-term prospects for opportunity in North America continue to be the driver of supply side gas developments. The commercial viability of other avenues rests in the diverse costs, obstacles, and regulatory and market institutions, which because are present for each of the other frontiers, must be parallel and equally regulated to maximize the full potential of energy sustainability and economic development. In effect, the various factors above become incorporated into an opportunity-cost analysis scheme, which, because of the inherent nature of the markets and the vast regulatory organizations involved, will be determined and revealed only through the passage of time.

Ultimately, the reality and questions that drive the market are indications there is a strong need for stable supplies of oil, the question faced is whether that be achieved from the continuance of exploration and production within the Middle Eastern Countries, or throughout the countries within the Western Hemisphere; while this has been a discussion in the U.S. since the 1970’s, it has become more of a reality due to resources that were not in play until recently. As such, policy matters due to the exploration and production of numerous intertwined regulations between energy, water, and the environment. Therefore, this demonstrates how innovate thinking away from conventional methods is leading the possibility of other frontiers and the future of energy.