The Permian Basin in Midland Texas is the epicenter of oil production in the USA. There is consensus growing amidst the industry leaders there. They believe that oil production will peak in a few years and then plateau at that level. This means that the opportunities for profitability will be with the shareholders while consumers suffer.
Fracking and oil boom
The oil production growth in the USA was spurred by fracking. However, investors soon realized that this growth was the product of their reinvestment. Reinvestment had reduced the profitability of their returns. This realization across the board has united a once fragmented industry. The atmosphere is right for mergers and acquisitions. Shareholders are looking to make their cut in a few years as the oil production peaks. This could lead to massive gains for big conglomerates like Exxon Mobil.
Oil as a commodity has been blamed many times for inflation including the one right now. OPEC+ just announced cuts in oil production which has led to a spike in inflation as energy prices go up. The volatility in oil prices is back and markets have lost hope that the oil price will stabilize.
Energy Market At Crossroads
There is a change in the world’s attitude towards oil and petrochemicals. Governments across the world are trying to reign in their carbon emissions and focusing on electric automotive options. The global demand for gasoline and petroleum as fuels will keep going down. The demand for petrochemical products, however, is not abetting,
This transformed relationship will define the future of oil and industry. In which direction this relationship will go is anybody’s guess.
