how-the-us-energy-market-will-change-after-the-pandemic.-cer-report
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Numbers, ongoing operations of the US energy giants and scenarios taken from the latest report “Geopolitics of energy” of the Cer edited by Demostenes Floros

The US oil sector is in crisis, thanks to the Covid-19 pandemic which is “putting demand under pressure”. The consequence? A process of restructuring of manufacturing companies that will lead to the loss of jobs and difficulties in the fracking sector. This is the analysis contained in the latest issue of “Geopolitics of energy” of Cer edited by Demostenes Floros.

THE PROCESS OF CENTRALIZATION OF CAPITAL

We start from the process of ‘centralization of capital’ as the result of the struggle to conquer the markets: “This conflict increasingly determines a concentration of capital in a few hands” and, in this regard, “in the energy sector of the United States, a series of liquidations, mergers, acquisitions of national capital by other national capitals, but not foreign ones, are currently underway, as a consequence of the sharp decrease in world demand for crude oil and the collapse in the price of a barrel “.

CAUSES OF A POLITICAL NATURE

To these economic causes, there are others of a political nature. Above all, “the defeat of the commissioner of the Texan Railways, Ryan Sitton, whose intent was to intentionally reduce US oil production (primarily Texas), joining in a legally binding manner to OPEC plus”.

“When demand returns to 90-95 million b / d, the country with the greatest loss of oil production will be the United States,” said the commissioner. Bloomberg, on May 4th.

THE OPERATIONS OF CONCENTRATION OF CAPITAL IN THE USA

The CER study reports many examples of capital centralization processes in the US energy sector that have occurred since the beginning of the pandemic, recalling how “in fracking alone, almost 9,000 companies operate”. These include the purchase of Noble Energy by Chevron for 5 billion dollars, the sale of OneStim, Schlumberger’s Hydraulic Fracturing Divisio, to Liberty Oilfield Services, the purchase of Wpx Energy by Devon Energy for 12 billion dollars, the operation that brought Concho Resources for 9.7 billion dollars into the belly of ConocoPhillips and the acquisition of rival Parsley Energy by Pioneer Natural Resources for 4.5 billion dollars.

THE FUTURE OF US ENERGY HEEGEMONY AND THE LOSS OF JOBS

“The consolidation underway in the market will bring with it the further loss of thousands of jobs – reads the latest issue of Cer ‘Geopolitica energia’ edited by Demostenes Floros -. Even though the US energy industry appears to have left the worst of the crisis behind it, as many as 70% of the more than 100,000 jobs to date in the US oil, gas and chemical industries may not return by. the end of 2021, Deloitte said in a report published in September ”.

In this situation “in the immediate future, the ongoing process of centralization of capital could allow the US majors to lower their production costs, as well as to overcome some of the serious financial limits”. But at the same time, it must be emphasized that the main limit of fracking that resides in production is very unlikely to disappear, that is, the high rate of depletion of the wells, between 50% and 85% during the first year, which in turn it implies continuous drilling ”.

US PRODUCTION CONSTANT IN 2021

From the point of view of production, “US crude oil output, after the previous peak of 9,627,000 b / d reached in April 2015, decreased to the minimum of 8,428,000 b / d reached on 1 July 201634. After that , it started to increase again up to the record of 13,100,000 b / d reached on March 13, 2020, and then dropped to 10,900,000 b / d from 13 November to today (weekly estimates). The Energy Information Administration estimates that US output will remain constant around 11,000,000 b / d for the whole of 2021 ”, concluded the monthly.

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