Oil and Gas Predictions for 2022
It’s that time of the year, it’s time for our Oil and Gas Predictions for 2022. Before we get into that, I want to give a big thank you and shout out to David Proctor. He reached out to me, I guess about a month ago and asked, “Hey Mark, whenever you do your predictions for 2022, can you go back and see how accurate you were with your previous predictions for 2021?” It is like, why have I not thought about that?
So, before we get in our predictions for next year, let’s talk about what I predicted last year and see how much of it I got right, so that we can laugh at. Last year I predicted $60 a barrel for WTI. Obviously, we hit that. I also predicted that peak oil demand is not happening, which I also looks like a nailed.
I Missed It
One my first true predictions though, was loss of downstream dominance. I missed that one, but I still think it’s going to happen. I still think the US is going to lose its downstream dominance, but it’s just going to take longer though, I really thought it was going to happen this year.
Got it Right
Number two was consolidation of tech. I absolutely nailed that one, right? There’s a bunch of big tech mergers and acquisitions this year that actually service the oil and gas industry. I expect that trend to continue.
Got it Right
Number three was about Generation Z coming into the workforce. Absolutely nailed that one. It’s funny to me, the oldest millennials are now in their forties, so generation Z is coming in and changing the culture of not only the oil and gas industry, but all the industry verticals out there. I think that’s awesome.
I Missed It
Number four was the rebirth of Canadian oil and gas industry. Boy, I missed that one. My logic was that as our politicians drove up the cost of doing business here and our need for that heavy complex crude goes up because the demand, that the Canadian oil and gas industry would step in and fill in. Unfortunately for our Canadian brothers and sisters, they have the same politics that are hurting their industry in some ways, even worse than it is here in the US. I totally missed that rebirth the Canadian oil and gas industry. My apologies. I really wish I was right about that.
Got it Right
Number five was about the remote worker. Obviously, I nailed that one. Remote workers are all over the place. I have a little equity stake in a company called RealWear, so keep your eye on them. They are greatly benefiting from this remote worker trend this year and we’ll continue in the future.
Got it Right
Then there’s ESG. I absolutely nailed that one to the point that we even have an ESG podcast, which is being reformatted and is going to be launching again early next year.
Got it Right
Number seven, I predicted last year in the importance of hydrogen. I got that one, right.
Number eight was loss of the middleman of the lack of distributors. That one’s kind of gray. That trend is starting to happen where the major suppliers are gone. I mean, the major buyers and operators are going straight to the manufacturers, but the middleman, the distributor part is still strong. It looks like it probably will be for a few more years. So, let’s call that one a draw, the loss of the middleman.
I Missed It
Then number nine was tracing hydrocarbons from reservoir to consumer. The ability’s there, the technology’s there, but I completely missed that one. Nobody really cares right now. I thought they would for ESG metrics. But yeah, completely missed that one.
Got it Right
Then the last one for what I predicted this year, is talent particularly around how young people here and in Europe don’t want to go to school to work in the oil and gas industry. Which means that our next generation of engineers, project managers and accountants are coming from countries that don’t have that bias like, Russia, Africa, the middle east and it’s happened.
So I think if you look at what I did last year, I got about 73% of those, correct, which is actually a little bit better than my average. I’ve been doing this for eight years now and I think my average is around 71%. Check out past predictions here: 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021
Lets get into my Oil and Gas Predictions for 2022
Let’s get into what I think is going to happen next year in 2022 price wise, I think we’re going to be average around $78 a barrel for WTI. I know we’re higher than that now December of 2021 and expect the price to stay higher for the first quarter, maybe even two quarters of next year, but then I expect as supply comes online, that price will go down. I think the average next year for 2022, for WTI will be $78 a barrel.
Our industry is here to stay, but unfortunately the US is losing its dominance, both in the upstream side of the house, the midstream side of the house and the downstream side of the house because of our politics. We will continue to use and burn 20 million barrels a day here in the US. Unfortunately, I think a lot of those hydrocarbons will come from other countries that don’t care as much about the environment as we do. It’s neither here or there, but you know our industry is in a good place, especially outside the US and in Europe. The hydrocarbon industry and the oil and gas industry will stay around forever, but we’re losing our ownership of the top levels here in the US, which is sad because of our politics.
#1 Oil and Gas Predictions for 2022 – Global Energy Shortage
Number one Oil and Gas Predictions for 2022, we’re headed toward a global energy shortage of epic proportions, something the modern world at least has never seen. It’s unfortunate. We’re running out of both crude and gas. When I say run out, that doesn’t mean you’re not going to be able to get crude oil or natural gas. What I mean is that the oversupply that buffers price swings, isn’t going to be there and it’s already not there for natural gas.
What’s going to happen is the price of energy will go up for everybody. For people that are well off in the world, it’s not going to be that big a deal to pay an extra a hundred dollars a month for your electricity bill, or an extra $20 to fill up your car. Unfortunately, for people that are less well off, they’re going to be impacted the most. It’s not just affecting the Western world, it will affect the entire world for next year, a global energy shortage. I expect some places in the world to see their energy costs go up the cost of their energy to go up to 40%. That’s crazy, almost 50% increase for 2022. I really hope I’m wrong about that one, folks.
#2 Fertilizer Shortage
The next thing is fertilizer shortage. Between 60% and 70% of all the fertilizer used in the world gets its ammonia from natural gas. So natural gas is a feedstock for fertilizer. Well, because we have this high price of natural gas because of the lack of supply in a couple of months around March. You’ll see fertilizer prices go up. Now let me tell you what’s scary about that. It’s not the cost of the fertilizer I’m worried about too much. It’s the cost of food. So the cost of food will go up globally. I mean, when you’re talking about 60% or 70% of the world is fed with fertilizer made from natural gas and those prices go up, that means 60% or 70% of the world’s food prices will go up. Once again, the people that are well off, aren’t going to suffer as much. You know, if I pay an extra $50 or $80 a month at the grocery store, I may grumble, but it’s not going to be the end of the world for me, but people that aren’t as we’ll offer to suffer to feed their families. Once again, I really hope I’m wrong about this one as well.
#3 Combo Plants
Then number three Oil and Gas Predictions for 2022 is you could see all the petrochemical plants and refineries that have traditionally been built around the world combined. So, you could see combo plants being built all over the place because they have a flexibility of feedstock. The driver never was there before, but with these high prices and with some of the other things that were enter to next year, I think most of the new petrochemical refineries will be combination plants. It’s actually really cool. It means that whatever is you can make money at next month. You can switch that plant to produce that. So, if one month that makes more sense for you to make jet fuel, you can make jet fuel. If, if you know another quarter, it makes more sense for you to make naphtha, then you make more naphtha. I think it’s one of the trends that a lot of people will miss is that all the new plants will be combo plants and cause that feedstock flexibility.
#4 Oil and Gas Predictions for 2022 – Supply Chain
Then supply chain. I know, I mean, everybody’s seen the pictures, all the container ships stuck in ports all around the world, but it’s much bigger than that. You know, things like tubulars. Nobody can get tubulars out in the Permian right now. That means even the demands coming back and people want to drill. If you can’t get the raw parts to drill and complete and go and production for a well, you’re not going to be able to go in production. That’s going to do a couple things. It’s going to drive prices up for all the parts and pieces we need in our industry to function. It’s going to be that people that normally would not have used things like previous used drill stems. There has to be a market for used parts and pieces that could come back with a roar, which means the aftermarket and the refurbishing of equipment our industries is going to take off.
So, if you’re in a service company and a part of your businesses is repairing motors, pumps, whatever that part of your business is, is going to go through the roof because of the supply chain issues. The supply chain issues in oil and gas have hit us particularly hard because a lot of the choices that companies are making right now. Especially between some of the big manufacturing areas of the world like China are prioritizing consumer goods because you can make more margin on that.
Now’s Your Time to Get In
Well, that means they’re not going to prioritize moving the parts and pieces we need in the oil and gas industry, especially in the upstream side of the house. So supply chains will be a major issue is going to drive to prices all through the industry. It’s going to cause things like new technologies and maybe new process and maybe even new tools to be adopted. So if you’re a valve manufacturer, and you can never get your foot in the door and oil and gas, 2022 will be a good year for you to come in the industry and show what you can do.
Then combined with that supply chain issues and inflation, the cost of everything is going up. I talked earlier about how I think this global energy shortage is to drive the price of energy up. Then eventually that shortage of natural gas, especially is going to drive the price of fertilizer up, which then will drive the price of food up where naturally have this inflation thing going on here in the US, Europe and around the world. Not to get too deep into the finances and the politics of why we’re going through an inflation cycle, but we are.
Once again the problem with inflation is something that you paid a $1 for last year in 2021, you could pay a $1.25 in 2022. That’s going to hurt a lot of businesses that operate on very low margins. Think of things like fuel refineries here in the US their margins are very, very slim. So, as inflation goes up as the cost of what it takes for them to make gasoline, diesel, jet fuel goes up, they’re going to pass those prices onto the consumer it’s already happening. What you’re doing is you’re seeing people that don’t understand how the industry works or basic economics, pointing their finger at the oil and gas industry saying, that’s why prices are going up at the pump, and it is not why prices are going up with the pump. So the thing about this inflation, I think it’s effect more negative political pressure toward our industry because people just don’t understand that our policies of our political leaders are causing or partly to cause these high prices at the pump.
The fact that as an American, as somebody in the oil and gas industry, I’ve watched our current administration ask other countries like OPEC and Russia to increase production, to lower our costs at the pump. That is ridiculous, right? We have the ability to do it ourselves. My concern is that inflation is going to drive more negative public perception and political choices toward our industry, which is going to hurt us more.
#6 Oil and Gas Predictions for 2022 – Supercycle
But also think that 2022 is the start of the next Supercycle. I think we’re at the very beginning of a ten-year bull run on the oil and gas industry, it’s going to be different than any upmarket we’ve had. It could be quick, it may not actually go the normal ten years, but like most of our cycles do, it maybe a little bit shorter than that and it’s actually a good time to be in our industry.
Prices are going to be high for hydrocarbons for both natural gas and for crude oil. There’s a constrained labor market. There’s a constrained parts and pieces. You know, we can’t get the supply chain stuff that we need. So, if you add all that together, it’s going to be a good time to work in the industry. We’re going to be busy, going to be short short-staffed, working our butts off, but are going to be working and going to be making money. So, this next Supercycle I’m really looking forward to. I think it’s going to help erase a lot of the downtime and the loss of value that a lot of the companies have experienced this last six years or so.
#7 Lack of Skilled Labor
Then Oil and Gas Predictions for 2022, labor constraints. One of the things about labor constraints is you’re not going to be able to build these new petrochemical plants all over the world that I’ve talked about earlier. Well, the demand for petrochemicals is going up, just like the demand for fuels is going up because the global demand for the consumption of hydrocarbons is going up as we ease out of this latest round of COVID stuff. Without enough people to come into that industry to work, especially the skilled crafts, pipefitting, welding, machining and that sort of stuff, we’re not going to build a build these plants that could add to the supply of petrochemicals.
Once again, that means that things that are made from petrochemicals, like your nylon shirts, lipstick, soccer, balls and fishing string, the price of all that’s going to go up because there’s not enough workers to build the plants, to make the petrochemicals, to make those products. Once again, it going to drive prices up. This is not something I want to see, but this labor constraint is huge and there’s no secret island of pipe fitters, mechanics or welders that you can go find. So, there’s going to be a fight for these skilled craft laborers.
#8 Oil and Gas Predictions for 2022 – Energy Theft
Then as much as I hate to see this, I think energy theft is going to be a big thing in 2022 because the price of energy is going up. A lot of people are going to have to make a choice between heating their homes or putting fuel in their car to go to work. Nobody should have to make that choice, but unfortunately people will. I think you could see energy theft skyrocket. I don’t mean just individuals stealing gasoline out of people’s cars. I think you could see state sponsored energy theft, even maybe country sponsored energy theft. Unfortunately, that’s not going to be good for the environment when you start increase the amount of black-market oil and gas that black market oil and gas must come from somewhere.
Typically it’s illegally tapped from pipelines, which is dangerous as hell to be hot tapping a pipeline, just because you want to steal the crude or the natural gas. It also is geopolitics, especially at OPEC. You know, I think for the first time ever OPEC is really paying attention, not only to member countries that don’t meet production goals, but member countries that contribute to the black market, which hurts everybody. So I think for Oil and Gas Predictions for 2022 energy theft could be a major deal.
#9 Changing Consumer Fuel Mix
Then changing consumer fuel mix for Oil and Gas Predictions for 2022. Think about this. When I go fill up my car, I pull up to the gas station. It takes literally at the most eight or ten minutes, right, because you’re pumping gasoline. Now electrical vehicles will come in more and more mainstay. However, it doesn’t take ten minutes to fill up electric vehicles. It takes hours. So, what do you do at a convenience store for two hours while your Tesla recharges? Nothing. What do you do at a movie theater or a restaurant while your Tesla recharges? You get it, right?
So, what’s going to happen is this changing consumer fuel mix between the internal combustion engines and electric vehicles is going to change the way we refill our vehicles. Home charging’s become much bigger than it is now. You could see other types of recharging stations, standup that are not the typical convenience store. I fully expect you to see restaurants built around EV recharging, movie theaters, other types of entertainment, anything that can keep you occupied for an hour or so while your EV recharges. They will also still have the snacks and drinks and the Slurpee’s and all that sort of stuff. That change in consumer fuel mix could change the behavior of things like our C-stores, our convenience stores. I think it’s kind of cool.
New Fueling – Oil and Gas Predictions for 2022
You know, the typical convenience store gas station has been the same way from, for forty years now. I think it’s kind of nice to upset that market a little bit. It’s always going to be a good time if you’re into alternative ways to fuel your vehicle. One of the things that I think is really cool is the new F-150 lightning that’s coming out, has the ability to recharge other EVs. Well thinking like Uber, what did you mean to Uber service to go recharge other people’s EV’s. They know they’re running low and they’re going to be shopping at the mall for an hour, or there’ll be at the dentist. You drive your F-150 over that you intentionally bought for this purpose and you charge them up. Now you’re making money at it. You know, it’s just going to be a different world, different environment. I think it’s really cool. Can’t wait to see how it kind of settles out and I think the very beginning of this consumer fuel mix change is happening next year, 2022.
#10 Chance to Change Negative Public Perception
Then finally Oil and Gas Predictions for 2022. As an industry, I think we have a chance to fight this negative public perception, head on. With these rises in energy costs that’s going to happen over the next year, with the rising food costs that can happen next year with people having to go without energy or having to make a choice between filling their car or heat in their homes. I think a lot of people around the world must stop, take a breath and look at this trend of trying to get away from hydrocarbons and go, “wait, wait, wait,” do we really want to try to get away from hydrocarbons? Look at all the baggage that comes rather quickly with trying to get away from hydrocarbons to power our world.
So I think as an industry, we have a chance in 2022 to raise our hand and say, “look, we help to power the world”. We’re the most vital industry to mankind. Let me show you how, but for that to work, we must time it just right. I think 2022 will be the year for us to be able to get people’s attention, but what we can’t do is have industry and trade organizations run this. Honestly, the API, you know SPE, those organizations are not good at telling the story to our world’s young people in a way that they understand, in a way they consume. This needs to be a grassroots movement.
I Would Love Your Help!
So, one of the things that we’re doing at OGGN which is our sister company with modalpoint, is that we’re telling the real and true stories of our industry. I think next year it will be a chance for industry to really shine. So, if you want to help us reach out, I would love to partner with companies out there and see if we can help fight this negative public perception. Do me a favor. If you like this, share it with your colleagues. Hope this helped. We will see you next time.