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2017 Energy Outlook: 4 Must-Follow Sectors For Investors
1. OPEC: Market watchers will need to keep tabs on OPEC and non-OPEC monthly production decreases to see if key oil producers are adhering to their quotas under both the November OPEC production agreement and December OPEC/Non-OPEC production agreement. Oman, Venezuela and Kuwait are already implementing production cuts, as is Saudi Arabia. As 2017 progresses, however, those keeping tabs on global oil production need to watch Iraq, Iran and Russia . These are all countries that produce over 3.5 million bpd and are not motivated to cut.
2. North American Oil Producers: 2017 is not likely to see a roaring return to the exuberant shale oil production of 2012 and 2013. Many companies, like Continental Resources and Pioneer Natural Resources, increased their shale oil holdings significantly over the last two years and, while optimistic, are proceeding cautiously with production. Just because shale oil production can be restarted quickly does not mean it must. All eyes are currently on the hottest shale play right now, the Permian Basin in Texas. It is also important to keep tabs on the Bakken region in North Dakota.
However, interested investors should keep their eyes on less saturated areas like the Anadarko Basin and Mississippian Line as well as areas like Alaska’s North Slope, where shale oil technology is just being considered.
3. Oil Services Firms: After two long years of contraction, companies that provide workers and equipment to oil and gas extraction companies will finally start expanding in 2017. These include well-known firms such as Halliburton, Baker Hughes and Schlumberger. Already, Halliburton has announced it is hiring 200 workers for oil production in the Permian region this month. Even if the price of oil does not exceed $60 a barrel this year, oil companies seem to have secured the credit they need to begin to spend on exploration and production for the long-term. This means oil services companies will gradually be restarting idled equipment and rehiring laid-off workers during 2017.
4.Alternative Energy in America: 2017 could bring significant changes to the finances of alternative energy companies in the U.S. If the Republican President and Republican Congress follow through with promised changes to the tax code consumers may be without federal tax breaks for electric cars and other green technologies. Solar and wind energy companies may also be without some of the generous federal subsidies and tax incentives they currently enjoy.
Whether the Department of Energy will continue to use taxpayer money to fund renewable energy ventures (as it has under Secretaries Chu and Moniz) is unclear. Texas did run a similar venture capital-style program while former Governor Rick Perry was in office, and he has been nominated to lead the Department of Energy. However, there is opposition to such market interference among the more libertarian members of the Republican Party. In addition, the Trump administration may well decide to enforce relevant regulations differently, such as a choice to hold solar and wind farms liable for the death of protected birds including bald eagles. On the other hand, if the price of oil and other fossil fuels does rise, this can only be good news for the motivation to finance, develop, and market alternative energy technologies. Also, President-Elect Trump has stated multiple times that he supports “all” forms of energy, especially those originating in the U.S.
Ellen R. Wald, Ph.D. is a historian and scholar of the energy industry. She writes and consults on the intersection of geopolitics and energy.