Anyone who has tracked developments in the energy markets has had to sift through a lot of raw information and some degree of confusion. It seems some new shock follows the previous one by the week, or news is contradicting itself. Not only does this complicate the picture for those trying to make sense of political and environmental issues but also for investors trying to decide where to put their money. What strategy is the best one to follow? How does one put together a portfolio guaranteed to bring the biggest return?
For example: how do readers process news about activities connected with shale oil and gas exploitation? When shale extraction became a major part of oil and gas production because of new technologies, Saudi Arabia responded by launching a price war. They increased production from their oil fields to make conventionally-extracted oil cheaper and “tight” oil uneconomical. This was done in order to secure their own market advantage but the strategy backfired on them when the big oil companies decided to match Saudi production barrel by barrel.
Oil ended up crashing to around $20 per barrel from the resulting supply glut. Big oil producers still profited from the demand side remaining strong, justifying production. In the meantime, resource surveys conducted by the U.S. Department of Energy identified vast shale basins that could now be exploited due to the new extraction technologies at hand. The potential increase in supply of both oil and natural gas, an even more valuable resource, can feed continuing and growing demand for the next several decades. This indicates where investment dollars can be placed to make the best bets on the shale bonanza. Then, there is the recent end of the oil price war and market adjustments that have stabilized the price of oil and forecast a steady rise over the next few years. This also affects the investment picture.
On the other side of the coin, there are the objections of environmentalists who look upon shale production as a new generator of toxic waste, groundwater pollution, and as a driver of present climatic warming trends. With all these various contradictory concerns flying back and forth across the media, a perspective on the news is needed now more than anything to make sense of developments. Readers can comment here, join in on the discussion with other readers, and perhaps gain that perspective in order to clearly see the whole picture.