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Outlook for the Oil and Gas Industry

Posted on September 03, 2013 in Oil & Gas Industry

Generally speaking, there are many ways to view the oil and gas industry. Each area has a direct impact on the industry's present and future outlook. For consumers, oil and gas provides more than half of the necessary energy to meet daily needs.

As fuels, these natural resources keep consumers cool during summer months and warm in the winter. They help to generate power for household appliances; and, they fill buses, trains, airplanes and cars to carry passengers to various destinations.

Oil and gas are also used as raw materials for fertilizers, plastics, fabrics and synthetic rubber. Practically everything consumers use – from industrial goods to personal items – becomes part of petrochemical feedstocks.

For businesses, oil and gas has a massive presence on world energy markets. As these markets continue to expand, companies spend billions of dollars to increase oil and gas production to meet the demand. Many countries extend invitations for oil and gas companies to explore territorial waters and lands to find more reservoirs. Doing so brings employment and billions in revenue to these countries.

Headlines dominating the industry for several years have been a mix of oil spill disasters and unconventional development opportunities. With technological advances unlocking new sources of energy such as shale gas, the global landscape of oil and gas is set for a new era of change.

Global Demand

Developing countries such as India and China continue to spark a growing global demand even as the oil and gas industry explores new sources of energy. Increasingly, deep water, arctic regions and nations that face politically turbulent times have oil and gas reservoirs to be explored to meet increasing demands. According to the Energy Information Administration, 2012 saw a record high increase of crude consumption worldwide by 0.7 million barrels per day. Projections for 2013 are estimated to add another 0.9 million barrels per day and 1.2 million barrels in 2014.

Domestic Supply in the U.S.

The EIA notes that natural gas production is higher in 2013 that it was in 2012. Domestically, industrial and electric power sectors are increasing their natural gas usage. The increase of supply in the U.S. is also sparking global markets as the U.S. is exporting more gas to other countries.

The American Shale Revolution

The growth of shale gas production is emerging as one of the most important industry developments. Between 2007 and 2012, it is estimated that dry gas production increased domestically in the U.S. by 25 percent. The production reached more than 65 billion cubic feet per day, a record high in 2012.

One of the results from this surge to impact to oil prices and natural gas prices. During the month of April 2012, natural gas prices plummeted while oil prices increased. This changed the U.S. oil-to-gas price ratio.

Nevertheless, dry gas supply is expected to grow even with weak natural gas prices. This is possible since dry gas is a by-product of profitable liquids rich shale.

Although new techniques of exploration and extraction brighten the future of oil and gas, technology will still impact the momentum of growth.

Oil & Gas Companies Make the Fortune 100 Fastest Growing List

Emerging technologies might shape the way oil and gas is extracted for consumption. However, many view this time as a golden age for the industry. Twenty-four oil and gas companies made the annual list of Fortune magazine's Top 100 Fastest Growing Companies list. Two companies were in the top 10: Holly Frontier, based in Dallas came in at number two and CVR Energy in Sugarland, Texas is number six.

Clearly, the multifaceted oil and gas industry will continue its road as a global industry that impacts lives. Many take the industry for granted until an oil rig explosion pollutes ocean waters or a refinery is damaged by a natural disaster. When a country revises energy policies or changes political leaders, some begin to wonder about the relative impact. When things quiet down, it is back to business as usual. Few realize that oil and gas continued to be available for everyday consumption.

Technological developments will continue to move the industry forward. Hydraulic fracturing for gas production has been a proven technology since 1947. Economies of scale will benefit from large production capacities in the U.S. and other countries. Breakthrough in refining technologies can minimize the impact of a disaster. These represent a small sampling of how the oil and gas industry is positioned to function as an energy source for many years to come.