Gulf Coast oil production is anticipated to decline each year over the next three years, with futures markets predicting there will be enough supply to meet global demand at between just $40 and $50 per barrel for the next decade.
That’s according to the 2021 Gulf Coast Energy Outlook, released today. The full report—explained during a webinar this morning—is now available on the LSU Center for Energy Studies’ website.
In May, Gulf Coast oil production was already down 13.7% from the year before, while natural gas production declined by 7.1% in May 2020 compared to May 2019.
Generally, over the past year, the outlook for the energy industry changed rapidly when the pandemic essentially shut down the global economy, rocking oil markets with a historic drop in demand and a failed OPEC deal to curtail output and sustain prices.
“In the long run, transportation demand will rebound, but not to its pre-COVID-19 trajectory, especially in the developed world,” Greg Upton, an associate professor at the LSU Center for Energy Studies who co-authored the report with the center’s executive director, David Dismukes, said during today’s webinar.
Still, there are some bright spots in the forecast. Model results suggest that Louisiana’s upstream employment “bottomed out” in September, meaning the worst could be over for the upstream oil and gas extraction and services sectors. By the end of 2021, Louisiana is expected to regain about 2,600 upstream jobs relative to the September trough, while the state’s refining and chemical manufacturing employment should increase by some 300 jobs, an 0.8% uptick.
Among other key findings:
- Natural gas prices are expected to be higher in 2021 and 2022 than futures markets suggested over the past two years.
- Although the U.S. electricity load has been relatively flat over the past decade, the Gulf Coast load has grown, with the share of electricity usage from Gulf Coast states increasing from 15% in 2007 to 17% percent in 2019, the most recent full year of data.
- Gulf Coast wind capacity has risen by more than 19 gigawatts over the past decade. Another 18 gigawatts of wind capacity is planned, and solar capacity is anticipated to increase by 33 gigawatts in the coming years.
- The 2021 GCEO energy manufacturing investment outlook, until the year 2029, totals $105 billion—most of which will be in Louisiana ($63.5 billion, or 60%), followed by Texas ($41.5 billion, or 40%).
For its economic modeling, this year’s GCEO assumes that COVID-19 slows globally and that the world will return to some level of normalcy over the next two years.
Additionally, it assumes that trade talks with China will not deteriorate; that new tariffs will not be implemented; that export commitments on net do not impact demand for Gulf Coast energy products; and that President-elect Joe Biden’s policy of banning permits offshore will not go into effect, at least over the forecast horizon. If some version of this proposed policy were to be enacted, Dismukes and Upton say it could have “significant negative economic implications” for the region. Read the full report.