Events
COVID-19 ONLINE EVENT SERIES V: What is the Future of Oil?
How the oil industry will adjust to the coronavirus induced global recession
On May 18 the Global Policy Institute and Bay Atlantic University held an online conversation via Zoom titled: What is the Future of Oil?
Watch the full video here
Event Summary:
The conversation was with Lucian Pugliaresi, President of Energy Policy Research Foundation in Washington DC, and a recognized expert in this critically important energy sector. Lucian (Lou) Pugliaresi has been President of Energy Policy Research Foundation (EPRINC) since February 2007 and managed the transfer of EPRINC from New York to Washington, DC. He previously served on the Board of Trustees of EPRINC before taking over the presidency. Since leaving government service in 1989, Mr. Pugliaresi worked as a consultant on a wide range of domestic and international petroleum issues. Mr. Pugliaresi has served in a wide range of government posts, including the National Security Council at the White House, Departments of State, Energy, and Interior, as well as the EPA. He has written various articles on energy issues published in the Oil and Gas Journal and other journals on Russian Petroleum, Energy Security and Energy Policy.
The event was hosted by Paolo von Schirach, President of the Global Policy Institute and Chair of Political Science and International Relations at Bay Atlantic University.
Low oil prices usually is very good news for all energy products (think gasoline) consumers across the globe. This time, however, the crude prices collapse caused by the global recession is not so good news for the US economy because the sector’s collapse adds to the ongoing US economic devastation. This is due to a vastly larger energy sector today in the USA. Indeed, in the last decade (thanks to “fracking”) America experienced an extraordinary fossil fuels sector renaissance. However, with extremely low crude prices, (on account of the global recession), many high cost US producers are forced out of business, with the consequent loss of thousands of high paying jobs. A vibrant US domestic fossil fuels sector which made the US almost self-sufficient is also considered a major plus for US energy security and therefore national security. With this in mind, what should be the goal of US public policy when it comes to energy prices? More broadly, how should the US (and G20) countries respond to the global oil crisis? What does a long period of lower oil prices mean for the structure of the U.S. oil industry and the future of US energy security?
Pugliaresi began the talk by presenting an in depth overview of the conditions of the US oil sector, pointing out the steep decline in output due to the dramatic collapse of domestic and global demand for oil and oil products on account of the freezing of most economic activities because of the coronavirus. Based on the available data, he opined that the damage to the US oil sector, while severe, is not terminal. No doubt, many high cost, low margin producers will be forced out of business. Expect consolidation and (for some time at least) production cuts. But the US oil industry has proven to be adaptable and resilient. There will be ways to cut costs even further , and therefor make money even assuming soft crude prices for quite some time. Regarding the geopolitical value of vast US energy resources whose future is not as bright as it was only a few months ago, Pugliaresi argued that energy security does not necessarily equal total energy self-sufficiency. Energy security really means reliable supplies in a world where energy is available to willing buyers, without artificial constraints, or other threats. He also added that it would be good for the United States to maintain close cooperation with Saudi Arabia, a traditional ally and a major oil producer and exporter.
Looking below the horizon, Pugliaresi argued that, even assuming improved renewable energy technologies, it will take a long time for wind, solar or other non-fossil sources of energy, to replace oil. Therefore, while we may look at a future in which global oil demand may decline somewhat, there will still be a global oil industry for the foreseeable future.