The rocks beneath the Arctic may be awash with oil, but it seems that few energy companies are in a hurry to extract it. In Alaska, attempts by the Trump administration to revitalise the Arctic oil industry seem to have fallen flat. According to VOA News:
“Seven bids were received, covering about 80,000 acres – or less than 1 percent of the 10.3 million acres offered in the National Petroleum Reserve in Alaska by the Trump administration. It was, by far, more territory than ever offered in any of the previous 12 NPR-A lease sales held since 1999.”
At first glance, this might just be a US issue. For the time being, shale oil and gas extraction in far more benign regions of the USA may be more attractive. However, the same thing just happened in Norway. According to Oil and Gas People:
“Norway’s latest offshore licensing round, focusing on the Barents Sea and Norwegian Sea, has drawn fewer than half the number of companies than its previous round attracted.
“Just 11 companies have applied for production licenses in the 24th licensing, compared with 26 which applied in the 23rd round, says the Norwegian Petroleum Directorate (NPD).”
Following the OPEC-Russia agreement to maintain their production freeze, oil prices have bounced back toward the top of the $40-60 per barrel “goldilocks zone” in which companies can just about break even without toppling the economy into recession. Nevertheless, it looks like even these prices are too low to tempt energy companies to invest in the inevitably expensive process of extracting (possibly absent) oil from the high Arctic.
Energy companies have yet to recover from the 2014 collapse in oil prices. At the beginning of the decade, with prices above $100 per barrel and with economists predicting a steady rise to $200 or more by 2020, investors were prepared to throw money at so-called “unconventional (i.e. expensive) oil.” But having got their fingers burned in 2014, few are about to dash back into the oil market on the strength of a modest rise in prices that could easily be wiped out in the event of a new recession.
It will most likely take oil prices well above $100 per barrel (at today’s prices) for several months (if not years) before investors are prepared to pile back into Arctic drilling again. What we don’t know is whether the global economy will ever be capable of sustaining an oil price that high. If it can’t, then we need not trouble ourselves with concerns about the environmental impact of Arctic drilling; simply because nobody is going to be doing it.
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