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The Macroeconomics of the Energy Industry … It’s Complicated – Preview from Colin Fenton’s Keynote Address at TCEP

At SGA’s Technical Conference on Environmental Permitting and Construction next week in Tampa, FL, the keynote address will attempt to un-complicate the macroeconomics of the energy industry. We’ve got a preview for you below:

The Macroeconomics of the Energy Industry … It’s Complicated

Natural gas is an essential commodity. After water, it is probably the most important natural resource of the 21st century. Yet, an aggressive political movement insists our global civilization must immediately halt all exploration and production of ‘fossil fuels’ in order to stave off an environmental catastrophe that will doom the survival of humanity.

Fortunately, more thoughtful observers question the logic of these doomsayers. They understand that natural gas, and other hydrocarbons, are—and because of scientific fact must always be—vital tools to lift humanity out of poverty, ignorance, disease, and other forms of suffering. Whether one applauds or opposes the Trump Administration, it sits on the more thoughtful side of this debate.

President Trump has also made an unequivocal commitment to reenergize U.S. manufacturing, especially autos, steelmaking, and metals-intensive consumer products. This commitment implies a strong uplift for industrial demand for natural gas and other hydrocarbons. These positions in turn show that the Trump Administration believes that both supply and demand of U.S. hydrocarbons will, and should, increase substantially over the coming decades. In concert with these views, President Trump has reversed President Obama’s blocking of the Keystone XL and Dakota Access oil pipelines. The new president also favors expanding U.S. natural gas pipelines into the consuming regions of the East.

At the same time, President Trump promises to erect physical and financial barriers with Mexico, the largest destination for U.S. natural gas exports. He also threatens to impose punitive tariffs on China, the most natural customer for growing exports of U.S. natural gas and crude oil. Unpredictable tweetstorms and other combative statements risk undermining whatever benefits might come from Trump’s policies on tax relief, cash repatriation, and infrastructure investment. These conflicts seem to threaten the business models of many natural gas producers.

And so: the session at SGA’s Technical Conference on Environmental Permitting & Construction in Tampa examines four scenarios for how the U.S. natural gas market may evolve over the next few years. The first, The Detroit Dent, envisions how a financial crisis stemming from the US auto sector might spill over into Venezuela, Mexico, and Asia, with significant consequences for US natural gas. The second, The Big Dig, plots how far the much ballyhooed infrastructure spending could propel natural gas demand and prices. A third scenario, Blowout, looks at how the unexpected arrival of the next economic recession could cause natural gas demand and prices to crater within the next fifteen months. A final scenario, Blizzard, enumerates several kinds of unexpected disruption that hold the potential to force natural gas risk to zig-zag suddenly.

Written by Colin Fenton, managing partner and head of research at Blacklight Research, LLC.

If you’re interested in attending the Technical Conference on Environmental Permitting & Construction, visit the event page for more information.

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