Energy By Robert Evatt
While 2020 wasn’t the best year for anyone, the energy industry was hit with a particularly nasty surprise. The sudden onset of COVID-19 and the lockdowns that came in its wake brought travel, commuting and a significant portion of work to a sudden halt, causing a dramatic drop-off in energy demand that year. But 2021 rapidly reversed the sector’s woes as society reopened and demand grew, according to Tom Seng, director of the School of Energy and Mervin Bovaird Professor of Energy Business at the University of Tulsa. “When you go back to last spring, oil had started to cross through the $60 per barrel area, and things started opening up locally and across the world,” Seng said. “Nobody expected demand to come back this fast.” With demand back up, most oil and gas companies are now thriving. The previous year’s losses have given way to significant profits based upon high prices, and organizations that had to lay off workers are now replenishing their workforce, although some slowly. However, Seng said most publicly traded oil and gas companies, including local ones, have exercised restraint so far.
Rather than significantly increase drilling, they’ve paid down debt, and publicly traded companies have bought back stock to shore up the stock price and pay better dividends to shareholders. “It’s been remarkable to watch that fiscal discipline,” he said. Keener Oil and Gas Co. has followed the same path. Dewey F. Bartlett Jr., president of the company, said Keener, like others, are largely concentrating on paying off debt and building up depleted savings. “Rather than spending money by drilling, we are spending funds to repair and improve the production of our existing wells,” Bartlett said. “The pricing environment has been bad for quite a while. Those that stayed in business had to retrench in order to survive.” Increased oil prices have been a boon to local oil companies, though opinions differ as to their cause. Seng said he believes the rapid rise resulted from a sudden increase in demand, with worldwide governments lifting COVID restrictions and life returning to something close to normal. “No one expected demand to increase as rapidly as it has,” he said.
However, Bartlett said the higher prices could also stem from the Biden administration moving to reverse much of the Trump administration’s work to increase North American oil production. “That prevented the importing of oil from Canada, our best friend and trading partner, directly to Cushing, Oklahoma, where domestic oil market prices are determined,” he said. Bartlett said he believes oil prices will stay in the $80 per barrel range this year, while Seng said he believes oil prices will fall throughout 2022 to lower levels than currently exist.
Natural gas on ice Though oil prices shot up, the increase was nothing compared to what happened with natural gas. Brutal winter weather hammered the region in February 2021, with large amounts of snow and an extended period of sub-zero temperatures keeping everyone inside and struggling to stay warm. On top of greatly increased demand, the weather caused a brief halt to natural gas production. As a result, natural gas prices shot up from between $2$3 per Metric Million British Thermal Unit to as much as $23 MMBtu, according to the U.S. Energy Information Administration. Prices fell from the peak quickly but left the threat of high bills in future months to cover the cost of natural gas used by consumers. Sid McAnnally, CEO of ONE Gas, said utilities such as his worked diligently to both keep the supply flowing and prevent customers from seeing their gas bills skyrocket. ONE Gas had to react quickly to work with legislators to protect customers from the significantly higher price for natural gas used and smooth out customer bills forward. Right now, ONE Gas and other utilities are working with regulators to determine how to recoup the cost for natural gas used during the event from consumers through relatively modest monthly cost of gas increase, a process that could take decades. Seng said regional utilities have taken the lessons of February 2021 to heart and are making various preparations to ensure future harsh winters don’t take them by surprise.
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