It’s that time of year, time for my oil and gas predictions for 2023. But before we get into that, let’s recap what I got right and what I got wrong last year.
What I Got Right and Wrong Last Year
So number one for last year, global energy shortage. Absolutely nailed that one. Number two, fertilizer shortage. Yep, nailed that one. Number three, combo plants. I got that one wrong. I thought there’d be a lot more construction of refineries and combo plants, but because of the political unrest and supply chain issues that didn’t happen. Number four, supply chain issues. I nailed that one. Number five, inflation. Got that one right. Number six, the beginning of a supercycle. Got that one right. Number seven, lack of skilled labor. I got that one right. Number eight, energy theft. I got that one right. Number nine, a change in consumer fuel mix. I’m going to call that one a draw.
I thought there’d be a lot more electrical vehicle sold in 2022 and the need for more recharging stations, but there was a constraint on the supplies needed to build electric vehicles, so it didn’t grow as fast as I thought it would. Then number 10, the chance to change negative public perception. I absolutely got that one right.
If you look at what I did last year, I got 80% of those predictions correct, which is much better than my average. I’ve been doing this for nine years now and my average is about 74%. If you want to check out the past predictions, there’ll be links in actual show notes going all the way back to 2014. Check out past predictions here: 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021 and 2022
Pricing for 2023
Before we get into my predictions, 2023, let’s go through my pricing. What I think prices will be for 2023. Brent will average about $102 a barrel. WTI will average $95 a barrel. Natural gas will go for $7.05 cents per million british thermal units. But it’s a mess to try to predict this. Between the EU and G7 sanctions on Russia, China opening back up, OPEC’s inability to increase production, and the end of the SPR releases and the need to buy the crude order to fill the SPR back up. It is hard to get a line of sight on any of this.
Oil and Gas Predictions for 2023
All right, so let’s get to my oil and gas predictions for 2023.
Number one, peak people. If you look at the world’s population growth, it’s still growing, but the growth percentage is slowing down, we are coming to the top of that bell curve. Certain countries like China for years had a one child per couple, literally government mandated order. Look here in the US, birth rates are really low. And there’s some states in the US like the upper East Coast where there’s such a disparity between the number of new births and the number of people that are dying. If that trend continues in another 60 or 70 years, there’s going to be nobody living in those states. So for a long time the world was worried about population growth. Too many people for the earth support and think in 2023, you’re starting to see that peak people come in, which means somewhere in the future, the problem’s going to be that we don’t have enough people on the planet. That’s a strange one to think about.
Number two prediction for next year. Major conflict, and I hope I’m really wrong about this, but between what’s going on between China and Taiwan, Iran and Israel, Russia and Ukraine, and then the world’s social unrest, food and energy shortages, high prices, everybody’s on the edge right now. And with these hotspots around the world, geopolitically, all it takes is somebody to make a mistake, one soldier to pull the trigger when he shouldn’t. Somebody to push a guided missile button when they shouldn’t. And we have a major conflict, not a world war, but a major conflict. Now if that happens, you will see prices of crude spike to 120, maybe even $150 a barrel. And like I said, I really hope that doesn’t happen.
Birth of the Mega Majors
Number three, prediction for 2023. Birth of the Mega Majors. So for years, Exxon and Chevron, Shell, BP were all neck and neck competitors. Well, for the last couple years, they’ve kind of split up on their strategies. So Exxon and Chevron are putting their returns and their capital back into hydrocarbon projects. BP and Shell are taking their returns and their capital investing in renewable projects and their shareholder value and their profits show the difference. Chevron and Exxon are doing so much better financially than BP and Shell because that difference in strategy, which is allowing Chevron and Exxon to grow, and they’re going to grow much bigger than BP and Shell. And as they grow bigger, they’re going to have more capital to deploy, more reach, more leverage, both with governments and with vendors, which is give them even more competitive advantage against BP and Shell. So I think you’re seeing the birth of the Mega Majors. New term, I should patent it probably.
Carbon Capture and Storage
Next thing for oil and gas predictions for 2023, carbon capture and storage, regardless of what you think about carbon dioxide, it doesn’t matter. There’s business here and there’s two big pieces of it. Number one is the world’s governments are funding, carbon capture and storage, carbon taxes, carbon caps, all this stuff, which means that there’s government money to fund this sort of stuff and companies are taking advantage of us. Number two, carbon dioxide is actually a commercial product that you can make money on, whether there’s government subsidies or not. So you’re seeing all these projects going on where they’re pulling CO2 out of the air, they’re building the infrastructure like pipelines to move it around. They’re storing the carbon dioxide and then they’re using it to do enhanced oil recovery. And so it use to be they had to buy that CO2 off the market for enhanced oil recovery. Now they’re using government subsidies, it’s genius actually, and, and capture the CO2 making money from the government. And then they were using it for enhanced oil recovery. So regardless of what you think about this, carbon capture storage is going to be a big business starting in 2023.
Anti Renewable Movement
Then number five, anti renewable movement. The world’s had enough. You’re seeing people, companies, countries look at what’s going on with the renewables. Look at things like ESG and then turn around and look at how expensive energy prices are, how expensive food prices are and the fact that it’s causing social unrest. And they’re going “you know what, maybe renewables aren’t the way to go, or maybe we should go as fast”. So you’re going to start seeing a pushback against renewables. And that’s not a good thing. Our biggest problem in this world right now around energy, is we’ve allowed it to become politicized. We need to disconnect politics with energy. The energy mixe has always changed and always will. Every energy source has an impact. Every energy source’s impact can be mitigated. But by pushing renewables too fast, it’s one of the main reasons the world’s in an energy shortage right now. And I think you can see a lot of people push back, which like I said, is not a good thing because it perpetuates the hydrocarbons versus renewables, the us versus you type of butting heads, which isn’t good for anybody. We need to recognize that all energy is good and that all can be used responsibly.
World’s Energy Shortage Will Continue
Number six, unfortunately the world’s energy shortage will continue. Demand will continue to be larger than supply. You see China starting to open up after Covid, you’re seeing other economies pick back up, but we don’t have the ability to get hydrocarbons back on the market to fund all this energy. And like I said, the renewables can’t fill that gap either. So unfortunately the world’s energy shorts will continue during 2023.
Shale Growth Will be Slow
Then number seven, unconventional shale growth will be slow. Between capital discipline, focus on returns, debt repayments, supply chain constraints, and then our current administration here in the US sending mixed singles to the industry. The shale growth is not going to boom like it did before. It will increase in size and it will grow, but that shale growth will be very slow, which leads me to number eight.
Oil and Gas Predictions for 2023 – Offshore Oil will Boom
Offshore conventional oil will boom. You’re seeing, offshore projects pick back up all over the world. Even some deep water projects have picked back up, which are very expensive. And the reason is it’s a much better return and has a much longer decline rate than the shale resources. So the world’s in an energy shortage, there is money to made off hydrocarbons and offshore oil is going to boom because of that demand.
Capital will be Easier to Get
Then number nine in the industry for 2023 capital will be much easier to get. For the last few years capital is really hard, especially for the smaller and independent operators around the world because of ESG and funds and companies were not putting money back into the oil and gas industry because they were worried about ESG pushback from activists, from shareholders. Well, what they’ve done is they’ve missed out on tremendous returns in 2022. And so they’re seeing the amount of money they could have made that they missed out and they’re going “you know what, this ESG isn’t something as important as I thought it was versus me making a lot of money”. So you will see much easier ways to get capital in the oil and gas industry for 2023.
Record Business Year for Oil and Gas Industry
Then number ten, 2023 is going to be a record business year for the oil and gas industry. The other verticals will suffer, the world’s economy will continue to slow down. The recession’s going to get worse. But the oil and gas industry will be on fire for at least the next 8 to 12 years. Maybe even another 20 years, because we have to fuel the world basically.
Share and Comment
So there you go. There are my oil and gas predictions for 2023. If you like this, do me a favor, share it with your friends. And if you have any suggestions or any input on what I said, let me know. I’d love to have that discussion with you. Hopefully this helped. We will see you next time.