Moniz: Low crude prices unlikely to change US energy policies
Crude oil prices below $50/bbl could force some producers to reduce capital expenditures if they go on for long, but are not likely to change US energy policies, according to US Sec. of Energy Ernest G. Moniz.
“We will still see increases in our oil production in 2015. It has been tempered, but should reach 9.3 million b/d,” Moniz said during a Jan. 7 discussion at the Woodrow Wilson International Center for Scholars. “If low prices persist for a long time, reductions in capex will appear down the road.”
The Obama administration is trying to put together a comprehensive picture of what low oil prices mean beyond consumers driving more and buying new motor vehicles, Moniz said.
“One of the obvious global issues is whether this can help get Europe’s rather sluggish economy going,” he said. “There also obviously are several countries which depend heavily on oil revenue, some of which are US friends. We are looking at options.”
As the US continues to celebrate its dramatic domestic crude production growth from tight shale formations, it should not lose sight that it still imports 7.5 million b/d, Moniz warned.
“We continue to focus on reducing that dependence in a variety of ways, including vehicle research and alternative fuels, most notably next generation biofuels,” he said. “Costs are not there yet, but they’re coming down fast. We continue to advance electrification of vehicles. The high-level message is that we continue to reduce our import dependence as we produce more oil domestically.”
Prices tend to rebound
Other speakers agreed. “In 1998, when oil was $10/bbl, the price went back up within a year and a half,” said David L. Goldwyn, president of Goldwyn Global Strategies LLC and a former coordinator for international energy affairs at the US Department of State.
He recommended that the US ensure US producers can participate more fully for a longer time in global markets by reducing LNG and crude export restrictions, and pursuing policies that address climate change as well as energy security.
“Nothing cures low oil prices like oil prices,” observed Edward L. Morse, who heads Global Commodities Research at Citigroup. “Markets left on their own are likely to see increased cyclicality as projects are cancelled.”
Trends which emerged in 2014, such as weaker-than-expected economic growth outside the US, are continuing, he said. Sour crude producers could face a more disruptive market in the coming weeks with significant challenges from US Gulf Coast refiners, Morse suggested. “Markets always balance, but I think the year will be challenging because of the unintended consequences of low oil prices,” he said.
Europe also needs to make certain it pursues long-term goals despite short-term lower crude prices, noted Ana de Palacio, a former Spanish foreign affairs minister and founder of Palacio y Asociados.
She said Europe’s main challenges are to be more realistic and not rely so heavily on renewable energy, to address infrastructure deficiencies, to balance public and private participation, and to develop better national policies.
Contact Nick Snow at [email protected].
Nick Snow
NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.