216 - Kunal Patel from the Dallas Fed on the Q4 2022 Energy Survey
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China\\u2019s corn-based ethanol fuel threatens food security while crowding the market, state commentary warns
- China can\'t feed its own people, and they are using corn for fuel
- The US puts ethanol in gasoline to replace MBTE (found to cause cancer) but now puts more in its gasoline to replace petroleum - policy started during Bush Admin
- What is going on in China? Why don\'t they just reduce the amount of ethanol in their gasoline?
On gas stoves:
- see
for a good explanation\\xa0
- for a quick run down:\\xa0
Biden agenda, lithium mine, tribes, greens collide in Nevadahttps://www.nbc4i.com/news/politics/ap-politics/ap-bidens-agenda-lithium-mine-tribes-greens-collide-in-reno/- What\'s really green or not?- $700 million loan guarantee offered by Biden admin for this mine even though permits are being challenged in judicial system
Special Guest Kunal Patel from the Dallas Fed on the Q4 2022 Energy Survey
Ellen\'s Investing.com Column
https://www.dallasfed.org/research/surveys/des/2022/2204#tab-report
~ 200 oil and gas firms in 11th district (152 responses to survey)
Main takeaways:\\xa0
- expansion of activity solid
- costs continued to increase but some moderation in increases
- supply chain delays continue to persist
- employment demand in the field
- uncertainty up amongst executives
- Most executives think price of oil at end of 2023 will be in the $80 range (average $84/barrel)
Capital expenditures: 2022 vs. 2023
- firms are looking to increase capital expenditures
- BUT there\'s also cost inflation, so much of the capital expenditure increases could just be due to cost inflation
- expect small increase in activity, nothing too significant, but spending will go up.
https://www.dallasfed.org/research/surveys/des/2022/2204#tab-questions
- Will cost inflation be higher than last year? thinking is that is won\'t be as much of an increase.
- How does this fit with the EIA forecast? Activity will increase. More firms are saying they are increasing production not declining but the increase is declining. Slower growth is the key word here.
- EIA says 12.6 million bpd by end of 2023. Can the Permian hit that? On an annual basis we will produce more, but on a month to month basis we won\'t hit as high production levels (13 million bpd in 2019).
- "Slowing growth" is the word for 2023?
- But maybe slower growth isn\'t a bad thing? Activity will be higher in 2023 than in 2022. How long will our resources last?\\xa0
- Cost inflation makes it hard for firms to know how much they are going to spend this year. Supply chain disruptions are still having a major impact. Even if firms wanted to increase activity they couldn\'t because they don\'t have the parts.
- Maturing asset base is listed as number 2 reason why growth isn\'t happening as fast. Are US assets closer to end of life cycle?
- price volatility mentioned in comments "The volatility in commodity prices is creating bid\\u2013ask spreads to blow out on transactions. Fewer deals are to be had in this style of environment."
- regulatory environment listed less this quarter
- could there be a recession? this came up a lot
- CEOs prediction for the price of oil at the end of the year is most impacted by what the price of oil was at the time they were asked for the prediction.
- What price are you using for your budget question gets a much more conservative answer though CEOs are moving up the underlying price for their budgets.
- "Leasing has increased and new drilling has increased."
Q1 2023 Survey will be out at the end of March!
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com'