Quick Stats

Quick Stats

    You are here

    Ernst & Young Predicts Tumultuous Time for Gas and Oil Markets

    Future U.S. energy policy makes predicting demand difficult.

    By Alex Palmer

    New York -- With energy reform on the horizon and facing a tough economic environment, this is a time for energy companies to stay nimble, according to Ernst & Young's fourth quarter Oil & Gas Outlook. The outlook finds that optimism about the market and a weak U.S. dollar are helping to make up for lethargic demand and high inventories in oil prices.

    "Refiners and marketers are caught in a classic squeeze," said Charles Swanson, managing partner for Ernst & Young's Houston office, which focuses on the gas and oil sector. "The U.S. consumer is still in a pretty tenuous position right now and there is not a lot of spending going on. But with this recovery of the crude oil prices, in part because of the weaker U.S. dollar, refiners and marketers are in a really tough position."

    Produced by the consultancy's Americas Oil & Gas Center, the outlook looks at several sectors within the oil and gas market, including natural gas, oilfield services and global transactions.

    The downstream segment is seeing its demand reduced by the economic downturn, as well as the market growth for fuel-efficient cars and the expanding use of biofuels in refining processes. The oilfield services sector appears to be on the same trajectory, with rig counts down and markets for offshore oilfields relatively stronger than those onshore. Deep and ultra-deep offshore exploration is reported to be the strongest.

    Natural gas is showing less price strength than oil, with a large supply available. There is some expectation that as clean energy becomes a higher priority across the globe, demand for natural gas may see an uptick.

    "With storage and supply at an all-time high, short-term fundamentals for gas are very weak," said Marcela Donadio, Americas oil and gas sector leader for Ernst & Young LLP, in a statement. "However, natural gas has promising potential as the clean-burning bridge to alternative and renewable energy."

    The outlook reports that global oil and gas transaction activity is down about 20 percent so far in 2009 compared to the first three quarters of 2008. It urges energy companies to be flexible during these unpredictable times.

    "The key question in the months ahead is, once government-delivered stimulus efforts run dry, will private and corporate dollars step in to carry on the economic recovery and create growth in energy demand?" said Donadio. "But perhaps the even bigger question is the future of energy policy in the U.S."

    -- Nielsen Business Media

    By Alex Palmer
    • About Alex Palmer

    Related Content

    Related Content