New discoveries in Alaska and Texas have added billions of barrels of oil to claimed reserves, increasing odds that oil prices will remain low well into the future.
The New York Times reported that the finds come at a time of a global oil glut that has kept prices at roughly $50 a barrel even as environmentalists look for ways to keep fossil fuels in the ground and avoid continued increases in atmospheric CO2.
Earlier this month, Caelus Energy announced a new field off the North Slope in Alaska with as much a 2.4 billion barrels of oil. A few weeks before that, Apache Corporation said that an overlooked field in West Texas contains as much as 3 billion barrels of oil and 75 trillion cubic feet of natural gas, The Times said. The market is already swamped with oil and gas developed in shale fields with the help of hydraulic fracturing, or fracking, and experts said additional oil and gas discoveries may lie ahead in both Alaska and Texas.
Caelus said that the newly discovered field could produce 200,000 barrels a day. CEO James C. Musselman said the new field could play a “meaningful role in sustaining the Alaskan oil business” over the next 30 or 40 years.
The industry has been hit hard
The new finds are an up note for an industry that’s seen financial hardship in the last couple of years. The Times said that U.S. producers wrote down $177 billion in assets last year, while 102 U.S. and Canadian producers have filed for bankruptcy since 2015.
The industry has reduced spending for exploration and production, so over time there is likely to be a surge in demand that pushes prices upward — but not for the next several years. Crude oil prices rose slightly in the wake of a tentative agreement among OPEC countries to reduce output this year, but experts said to expect some countries to cheat.
Lower oil prices mean lower prices at the pump for gasoline, and lower costs to consumers to heat their homes, among other things. But, as a report at Politico predicted earlier in the year, the collapsing value of oil will have “profound consequences” on countries around the world.
What about the impact on renewable energy? High oil prices would seem to make solar and wind projects more attractive, slowing a shift away from fossil fuels. But not everyone agrees. Dan Esty, a professor at Yale University, said that the market for renewables has supply and demand pressures of its own, and the 2015 Paris Agreement on climate change will mean more demand for clean energy in the years ahead — oil glut or not.
“Investment in renewable power remains robust,” Esty told Politico. “In fact, the likely short-term drop in fossil fuel costs may help strengthen the long-term prospects of alternative energy. If the developers of wind, solar, and other alternative energy projects are forced to cut costs, their technologies will be more cost-competitive over time. When you hear that cheap oil sounds the death knell for clean energy, don’t bet on it.”
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