The Oil And Gas Situation: A Preview Of 2018

December 31, 2017

As 2017 comes to a freezing close, millions of citizens in New York state are keeping themselves warm and comfortable in their homes thanks to a plentiful supply of cheap natural gas. This despite the fact that their state government chose to outlaw the conduct of hydraulic fracturing in their state, denying thousands of New Yorkers the freedom to exercise their property rights. And every molecule of that natural gas is brought to New York and its citizens via pipelines, the construction of which has been virulently opposed by their Governor, Andrew Cuomo. For the provision of this great modern luxury, despite the massive obstacles tossed into its way by New York policymakers, the domestic oil and gas industry  says, "You're welcome, New Yorkers!"

All that irony aside, the closing of the year means it's time to take a look forward at the prospects for America's oil and gas industry in 2018. This past year will likely come to be remembered as the year during which the industry emerged from the three-year depression created when Saudia Arabia made the decision to flood the market with crude in 2014 in a misguided attempt to recapture market share it had lost to America's growing shale industry.

The big question for the industry going into 2018 is whether it will be able to consolidate the gains made during 2017, and build on the lessons learned from the mid-year 2017 price collapse that was directly caused by its rapid increase in drilling during the first half of the year. I've written many times about the lack of any government mechanisms to bring discipline to the highly-competitive upstream segment of the industry, but as we will see, producers are already receiving help in that regard that they had not anticipated six months ago, but which is exactly the help they need to help them avoid a repeat of the first half of 2017.

With that, let's take a look at what 2018 is likely to hold for the U.S. oil and natural gas industry:

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