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Energy independence: Oil production, demand will set prices

by Adam Wilmoth Modified: September 28, 2012 at 9:10 pm •  Published: October 1, 2012

/articleid/3714054/1/pictures/1845703">Photo - In this photo taken Nov. 20, 2009, a tanker truck makes a fuel delivery at a Little Rock, Ark., gas station. Retail gasoline prices headed downward to begin one of the country's busiest travel weeks, with more than 33 million people expected to hit the road for the Thanksgiving holiday. AP Photo <strong>Danny Johnston - AP</strong>
In this photo taken Nov. 20, 2009, a tanker truck makes a fuel delivery at a Little Rock, Ark., gas station. Retail gasoline prices headed downward to begin one of the country's busiest travel weeks, with more than 33 million people expected to hit the road for the Thanksgiving holiday. AP Photo Danny Johnston - AP

If the U.S. stops importing oil and other countries do not increase their demand by a similar amount, the world will face an oversupply and prices will fall, Molchanov said.

That probably is true in the short run, Molchanov said, but Saudi Arabia, the world's largest oil producer, is unlikely to curtail production indefinitely just so American companies can make more money.

Larry Nichols, executive chairman of Oklahoma City-based Devon Energy Corp., downplayed the concern.

“Oil is a worldwide commodity,” he said. “It is so easy to import and export oil that it is easy to balance the market. If we have a surplus in one area of the world and a deficit in another, we can move it to where it's needed. That's not the case with natural gas.”

While world oil demand has slowed over the past few years because of the global recession, Nichols said demand is likely to pick up again.

“As populations grow and as technology expands, the demand for hydrocarbons will just keep increasing,” he said. “People around the world want to live in houses that are properly heated and cooled and have computers just like in the United States. All of that increases demand.”

Steve Agee, dean of Oklahoma City University's Meinders School of Business, agreed that any price drop likely will be short lived.

“I'm not convinced we'll see prices falling in a dramatic fashion,” he said. “I do think there could be some downward pressure on oil prices until the world economies recover. But we are going to come out of this contraction. The world is going to grow again, and as we do, we will use that oil.”

by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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