By: Eric R. Hawkins – Mayhawk Energy, LLC – To say that we live in an anxiety-filled world right now is the understatement of the year. As I write this, a world pandemic is still in the air, President Trump and the First Lady have been diagnosed with Covid-19, the next debate in an Octagon is in two weeks, while a Supreme Court nominee is set to be appointed, and an election looms in 30 days. Oh yeah, oil is trading at $37.00 / barrel and rig count in the US is at a generational low. Otherwise, all is well.
For those of us in the oil and gas industry, reading articles about the ABSOLUTE DECLINE and PROBABLE DEATH of our portion of the energy sector has gotten old. Allow me a few paragraphs for pointing out that not only will be back, but we’ll be back in a big way.
Rewind back to 1979 (for those of us old enough). Iran has taken the US embassy and held the Americans hostage, we are sitting in lines at gas stations hoping that there will be enough gas when we push our ’77 Chevy Vega up to the remaining pump, and our political leaders and industry leaders are on the nightly news telling us the horrors of PEAK OIL. We’re gonna run out of oil within 20 years! There’s not gonna be enough for us to take our Sunday drives! Saudi Arabia, Iran, and others will control our future!
Now, fast forward to around 1997. George Mitchell and his crew in North Texas began the process we now know as fracking. It becomes the key that unlocks the oil and gas that the US and the World wants and needs to continue down the path of feeding a hungry industrialized world. The race was on. Within a decade or so, our problem was flipped upside down. We were able to extract and process all the oil and gas the world could consume and then some. So much for Peak Oil, as we became energy independent in the blink of an eye.
New problem. We became a victim of our own success. Too much product begets low prices. So here we are in the middle or hopefully towards the end of a worldwide pandemic, yet according to government reports, oil demand is back up to 97% of what it was pre-pandemic, which to me is astonishing. Given that two of the largest states are still in lockdown and airlines are still basically grounded, I thought this number would be much, much lower. The latest forecasts are that world demand and supply will meet again in mid-2021. Considering how 2020 has treated us, I’ll take that.
Shift gears for a second. Let’s talk about electric cars for a moment. If you’re like me, you hear that Tesla and many of the other major carmakers are going to flood the market with EV’s, therefore fossil fuels are gone. I beg to differ. Tesa’s look cool, but without government subsidies, they’re not so cool. Don’t get me wrong, I’m all about competition and innovation. But after 17 years, Tesla and the EV car world are still less than 2% of the market. The bigger issue I see is the charging stations. There are approximately 60,000 charging stations in the US and 275 million registered vehicles. You see our math problem here. EV’s may get some traction in certain low milage areas where owners have their own chargers but I think we’re decades away from a real charging infrastructure, hence the world still needs us.
My last point is about Global Oil demand in general. It’s not going to decrease. In my opinion, it will increase substantially in the coming years. Why? The latest projections for population growth is by 2050, there’ll be 9.7 billion folks roaming the earth vs the current 7.7 billion today. The majority of this population growth will be in developing nations. We may have excess oil now, but I think we’ll need just as many rigs and oil and gas companies to produce at a high level to fuel the needs of an ever-evolving industrial world.
Our guest contributor Eric Hawkins Co-Founded MayHawk Energy, LLC in 2007, and is a local to Norman, OK, and a veteran in the oil and gas business.