There are almost 2,000 people here at the annual conference of Cambridge Energy Research Associates in Houston this week, with "oil day" kicking off the festivities. Here are some recurrent themes/interesting things being said.
--There's going to be a carbon tax in the US. Or there's going to be cap-and-trade. What there won't be is nothing. There appears to be almost no disagreement here on that issue.
--The middle distillate part of the barrel is the portion of the barrel with the highest increase in demand, yet almost all the gain in liquids supply in recent years has been supplied by such things as NGLs, biofuels, condensates, etc. The problem is that these fuels are gasoline blendstocks or substitutes, so it doesn't help the growing squeeze on middle cuts. Yes, refineries can be retrofitted, but given the usual suspects of hurdles there -- labor shortages, high steel prices, etc. -- that can't be taken care of all that easily.
--John Hess of Hess Oil took over the company a few years ago, and he took an underperforming company and turned it into a high-flier. Yet he's fairly low-key and shuns publicity. So what did he do? He came to Houston and gave easily one of the best speeches ever heard from one of the opening speakers. One problem with the CERA meeting is that CEOs and other high-ranking speakers are always called upon to open the session, because of their prominence, but they are so tightly controlled that they often say little. This is not the usual plea by a reporter for a speaker to essentially write their first paragraph for them; even if they don't make news, the speeches are often just utterly predictable.
Not Hess. He gave a terrific address predicting the failure of supply to keep up with demand in the next 10 years, due primarily to a lack of investment and insufficient infrastructure spending. It was a clear, no-holds-barred statement of his views.
--Costs are rising. Not so much the costs to bring on one more barrel in Saudi Arabia, but the costs of bringing on new supplies anywhere. At a morning session, James Burkhard of CERA said the price of oil dropping to less than $60, even in a recession, would be a difficult accomplishment given that a $60 price is starting to look like an average cost for bringing on new crude supply. "We see a cost floor of $60/barrel," he said. "If it went below that the companies would react, cut back and then it would rise again. So for the next year or two we see resistance to any sustained deep move below $60."
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