The race to install midstream infrastructure in southeast Ohio and western Pennsylvania continues unabated.
Columbus Business First reports that there has been $3.5 billion in midstream investment in Ohio alone since April of 2014. The investments will help increase the flow of natural gas and natural gas liquids to the domestic and global marketplace. That is good news for people in the northeast United States, as the influx of new supply will likely lower their prices for electricity generated by natural gas, and at the same time, increase the amount paid to producers, according to investment research firm Global Hunter Securities, LLC. The report also cautioned that even with the increased supply able to get to market, that supply is likely to outpace demand by more than 7.0 bcf/d in 2019.
This news, along with recent reports that the U.S. has outpaced Saudi Arabia in oil production and the fact that world prices for oil are falling despite global conflict, means producers will be feeling the pinch on multiple fronts. The question then is this: how will producers manage their exposure to the costs of production and a falling price due to oversupply?
If history is a guide, these factors will result in a slow down in production in order to stabilize the price of oil. As far back as the boom and bust cycles smoothed out by Standard Oil, to the production from OPEC countries in the 1970s, and the modern day shale boom, the crucial variable of the cycle has been the intersection of supply and demand. The differences today are where the supply is coming from and what technology is used to produce it. In this regard, the United States is far ahead of other nations and should use our technological, legal and market advantages to benefit domestic producers.
Further, the access to global markets for oil and LNG exports for producers should be strategically aligned to support our efforts domestically and to engage on the world geopolitical stage to blunt the impact of nations opposed or openly hostile to the United States. In doing so, the United States can serve to benefit domestic employment and production while strengthening our relationships with nations around the world and directly limiting the power of other energy producing nations who would seek to curtail the strength of the United States overseas.
Clearly the market is at work in the energy space. It remains to be seen whether strategic, geopolitical policy will be implemented to encourage greater American energy self-reliance and strategic partnerships in globally significant parts of the world.