A boom of unconventional oil discoveries has forced financiers, economists, and policymakers to re-evaluate the shifting energy market and the potential for a price on carbon. Robin West of PFC Energy, Mark Campanale of Carbon Tracker, and Robert Johnston of Eurasia Group presented on the future of oil investments, prices, and economic regulations. Bill Loveless of Platts moderated.
- Expect the Unexpected: Although no one predicted the shale revolution and the global reverses in crude flow, the world markets make it impossible for the United States to achieve energy independence, West argued. The private sector will continue to respond to market forces, with the United States being the world leader due to its unique mineral property laws, decoupled gas market, and strong independent energy service sector, West added.
- Six Degree Co World: The carbon intensity of global financial portfolios is increasing, not diminishing, Campanale stated. Without financing any additional production, there are enough energy assets in the market to increase the global temperature six degrees Celsius, he cautioned. Furthermore, in the absence of regulations, the investment community is not in the policy conversation regarding how to manage these carbon-laden assets.
- Rise of the Independents: Refiners in strategic locations with the ability to process a wide array of inputs are poised to do well in this new era, Johnston noted. With the existing discounts in Alberta, regional refiners are indeed the big winners, West added. Large oil companies such as ExxonMobil are accustomed to major projects and have had difficulty adopting to the new environment, West said.
- Price: Some of the unconventional oil fields will never be developed due to high cost, Johnston argued. The price of oil will be determined not only by global demand, but also by the cost of operation, West agreed. Lack of Chinese refining capacity for heavy oils makes Canada dependent on U.S. refiners, Johnston added. Moreover, political uncertainty regarding climate regulation and pipeline approval in the United States is seen as a political risk by the industry, Johnston said.