2012 Think Corner

BEG/CEE-UT 2012 Annual Meeting & Forum
with The Oxford Institute for Energy Studies - Natural Gas Research Programme

Friends, Romans (or whatever), Country (people)!

Views from the BEG/CEE 2012 Annual Meeting and Forum
December 5-6, 2012, Houston, Texas
In collaboration with
The Oxford Institute for Energy Studies-Natural Gas Research Programme

Michelle Michot Foss, Ph.D.
Chief Energy Economist and Head

We thank our donors:

Forum Agenda

Monitoring U.S./Global Oil and Gas: Upstream Attainment, Producer Challenges
Michelle M. Foss, Miranda Wainberg - June 2012

This research note includes an update of CEE’s producer cost benchmarking with a focus on U.S. oil and gas, and especially conditions in the U.S. natural gas marketplace.  CEE research continues to support a roughly $6/MMBtu cost structure; U.S. producers continue to achieve some capital cost reductions for full, breakeven finding and development but cash costs have grown, a consistent trend over the longer term.  Several issues are identified for CEE’s continuing work including: upstream costs and reserves in the face of soft natural gas prices; oil and gas taxes; and commodity price risk.  Uncertain global economic views are encroaching on crude oil prices, with broad implications.  CEE researchers are updating our national oil company benchmarks to gauge potential worldwide risks. See the article for details of our analysis and let us have your feedback.

Persistent Puzzles in Commodity Markets: Factors Impacting Oil Price
Gürcan Gülen, Michelle M. Foss - June 2012

In this brief review, we identify the factors affecting the price of oil and discuss their interactions and impact based on existing literature and expert opinion (a detailed Appendix on the impact of speculation and an extensive list of works cited are also provided). The oil market is global, highly liquid and fungible but very complex; there are numerous global factors with the potential to impact the price of oil significantly at any given point in time and these factors are quite dynamic. The empirical literature provides strong evidence of struggles to capture this dynamic complexity; researchers using different methodologies; different data sets and time periods and focusing on different aspects (or factors) can find support for alternative hypotheses or reach quite different conclusions even if testing the same hypotheses. An important constraint is the lack of reliable, timely, publicly available data from (i) the fastest growing segment of the world oil marketplace, i.e., emerging economies led by China, and (ii) positions of heterogeneous traders in the oil derivatives market, especially on over the counter (OTC) transactions. The ancient parable from India (often used for economists like us) about blind men touching different parts of an elephant and offering conflicting descriptions based on their individual perspectives seems to apply.

Results of investigation with partial funding from U.S. Energy Information Administration.

Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy
Michelle M. Foss, testimony before the House Committee on Science, Space and Technology - April 2012

"Michelle Michot Foss, chief energy economist and head of the Bureau of Economic Geology at the University of Texas at Austin, said the US keeps having to relearn the same lesson: “We have a rich resource endowment, and a nimble, inventive, and deep industry bench.” Companies and investors respond quickly whenever supply-demand conditions send an attractive price signal that suggests imbalance, she explained." See the rest of the Oil & Gas Journal coverage of the hearing. See the full text of Dr. Foss' testimony.

U.S. Gas-Power Linkages: Building Future Views
Gürcan Gülen, David Bellman, Michelle M. Foss - February 2012

This Think Corner research note expands on and explains the analysis presented during the December 8 morning session of our Annual Meeting.  We present a first pass from CEE's analytics platform and an approach for investigating complex interactions associated with natural gas in the electric power mix, including natural gas fuel price, environmental regulations, and other considerations.  The U.S. power sector currently consumes more than seven tcf of gas but it can more than double this amount in another ten years. See the full article for details of our scenarios and analysis. Our future research plans are outlined.  We invite participation!