THE WOODLANDS, Texas – The weak value of the US dollar has an effect on the worldwide price of a barrel of oil, Kenneth B. Medlock III reminded delegates at the plenary session of the 2013 Deep Offshore Technology Conference.
Medlock is the James A. Baker III and Susan G. Baker fellow in Energy and Resource Economics; senior director, Center for Energy Studies, James A. Baker III Institute for Public Policy; and an adjunct professor and lecturer in the Economics Department at Rice University.
He also pointed out that one difference between today and similar price trends in 1973-1982 and 1988-2009 is the US monetary policy.
The expected demand pull, particularly from China and India, is strong, but if either economy slips it will soften the prices.
This period of high prices with good relative returns has drawn investments. “These investments,” Medlock said, “have fuelled the resurgent US oil business over the past five years and that has impacted the Brent-WTI price spread, the volume of US imports, and the US foreign policy.”
The Gulf of Mexico remains a tremendous opportunity and it is unique around the world with deepwater activity investment attracting attention from operators around the world.
“The Mexico energy reform could boost Gulf activity, too,” Medlock said. “If the reforms are positive, offshore operations could get a boost because operations there do not have the same security problems as onshore.”
If the current trends in the US are maintained, the country could become an importer of heavy oil to suit Gulf Coast refiners, and an exporter of light crude and even petroleum products. Becoming a net exporter is a good position, too, he said.