Zachary Fitzgerald
Oil and gas industry officials may have some reason to be optimistic about the price of oil in the coming months, according to one business professor.
Peter Ricchiuti, a professor at Tulane University’s A.B. Freeman School of Business, was the guest speaker Tuesday during a meeting of the Atchafalaya Chapter of the American Petroleum Institute at the Petroleum Club of Morgan City.
Ricchiuti is founder and director of research for Burkenroad Reports, where students analyze the stocks of 40 different southern U.S. companies each year. Most of those companies are underfollowed by Wall Street securities analysts, its website says.
He expects for oil prices to continue to rise but not near record highs of over $100 per barrel.
“If we can stay in the low to mid $60s (per barrel), I think people start putting some plans on the board again,” Ricchiuti said.
As of Tuesday, the price of West Texas Intermediate crude oil was at about $57 per barrel, according to nasdaq.com.
Despite the downturn in the oil and gas industry the past few years, Ricchiuti does see “some upsides to the price of oil going forward,” he said.
“The U.S. dollar continues to weaken, and the U.S. dollar weakening is great for oil prices because oil is denominated in U.S. dollars,” he said.
Possible conflicts in the Middle East and supply disruptions could help the price of oil, too.
Oil production in the Gulf of Mexico won’t begin to decline until 2019 with many big, long-term projects recently finishing and the effects of low oil prices just starting to affect output, he said.
A decline in production will probably lead industry leaders to focus on development to allow for future production, he said.
Ricchiuti cited a recent MIT study that showed many calculations for shale oil production in Texas were “way too optimistic.”
If the oil and gas industry is able to get the “hype” out of the shale sector, more activity will likely come to the Gulf of Mexico, he said.
The industry will also see a lot of consolidation.
“There’s just too many companies,” Ricchiuti said.
Natural gas is a “big winner” for the future of fuels in the country, and Louisiana produces a lot of natural gas, he said.
“It really is the keystone to the state’s economy,” he said.
One of the most exciting segments of the energy industry is liquid natural gas, Ricchiuti said.
Companies have invested $50 billion into liquid natural gas facilities in the Lake Charles area, he said. Natural gas is taken from wells via pipelines frozen, condensed, loaded onto ships, sent around the world and then reheated, he said.
“The reason it works is that we have so much natural gas in this country that we’re getting about $3 an mcf (thousand cubic feet). It’s $6 an mcf in Europe and $9 an mcf in Asia,” Ricchiuti said.
“In the long run, it’s very good for natural gas prices,” he said.
The U.S. economy as a whole is “really heating up” and has been growing since spring 2009, Ricchiuti said. National unemployment is 4.1 percent, and full employment exists when the unemployment rate is at 5 percent.
“We are beyond full employment,” Ricchiuti said.
The biggest problem for many employers nationwide is finding workers with particular skills in a certain geographic region, he said.
“In a lot of areas, people are having to move (to find work),” Ricchiuti said.
Employers are telling educators that the younger generation is weak in “soft skills,” such as relating to other people and managing, he said.
“I think that’s the one thing that won’t go away is those soft skills,” he said.