Prices Drop, Companies Merge, UN Seeks End of Fossil Fuels

Petroleum prices decline. Record oil and natural gas production in Texas and across the U.S. have created an oversupply, causing prices to drop. West Texas Intermediate (WTI) crude oil prices traded on the New York Mercantile Exchange slipped below $70 on Wednesday, and natural gas prices dropped to $2.55 per British thermal unit (Btu). The decline in prices in the oil patch is being felt by consumers as retail prices for gasoline went as low as $2.45 a gallon in many locations across Texas.

The Energy Information Administration (EIA) at the Department of Energy predicts Brent crude oil, which is traded on the international market in London, will drop from its previous forecast of $93 per barrel to an average of $83 in 2024. EIA forecasts natural gas will average $2.80 per Btu from November to March (the major consumption period) because of the high production rate and warmer weather.

EIA believes crude oil and natural gas production will set records in 2023 and again in 2024.

Capital expenditures expected to increase. U.S. oil producers will increase capital spending by 2% in 2024, according to Evercore ISI. The industry will spend about $115 billion on producing oil and gas next year, about the same levels as 2019. U.S. crude production will likely increase by 150,000 barrels a day next year, compared with 1 million barrels a day this year, Evercore said.

Exxon, Chevron, Occidental Petroleum have big plans in the Permian Basin. Three of the largest U.S. oil companies – ExxonMobil, Chevron, and Occidental (also known as Oxy), have announced each company will increase operations in the Permian Basin of West Texas and eastern New Mexico following recent acquisitions. Exxon, who bought Plains Natural Resources for $64 billion, expects oil production to rise to about 3.8 million barrels per day (b/d) next year and 4.2 million b/d by 2027. Chevron recently purchased PDC and Hess and announced it plans to increase capital expenditures to $16.5 billion, with some $6.5 billion targeted for the development of shale acreage. Oxy’s $12 billion purchase of CrownRock expands its acreage by 10,000 and includes 1,250 sites currently producing.

Nations agree to reduce usage of fossil fuels. COP28, the climate conference of the United Nations, concluded with some 190 nations agreeing to transition away from fossil fuels (coal, oil, natural gas) in the future. The agreement calls for “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner” in an attempt to limit global warming to 1.5 degrees Celsius.

Methane emissions decline. Texans for Natural Gas also released a study last week stating Permian Basin methane intensity continues to trend downward, with methane emissions intensity falling by nearly 85% between 2011 and 2022, and during the same time period, total oil and gas production in the Permian increased by over 416%. The Permian Basin stands apart from other global producers not only because of its prolific production but also because it remains well below the flaring intensity of other global producers. In 2022, flaring intensity was 915% higher in Russia and 242% higher in Venezuela than in the Permian Basin, the study stated.

Alex Mills is the former President of the Texas Alliance of Energy Producers.