Why the Peak Supply of Oil and Gas was First Snubbed?

1. It is not the external factors, such as climate policy or electric cars, that have contributed to the fall in the oil price, but the technological innovation of the oil industry has led to a substantial increase in supply.

2. In the context of the easing of supply and demand, oil producers are shifting from pursuing production to pursuing lower break-even costs, large-scale and low-cost producers will be the main axis of oil supply.

3. The United States has become a new motor producer is one of the key variables affecting the rebalancing of oil markets.

As laslo varo, the IEA's chief economist, says, since the first world oil conference in 1933, every general assembly has been keen to discuss "peak supply" issues. They fear that the oil will eventually dry up, but this year it has been snubbed and forgotten.

Behind the details, the world's oil industry has come a long way in recent years. The experts says with the rise of the "shale revolution" in North America, the oil industry has entered an era of more modest, conventional and unconventional oil and gas, from a century and a half of conventional oil and gas. The production centers are increasingly diverse, besides the traditional production center in the Middle East--central Asia, the production of oil and gas in Asia Pacific, Latin America and Africa has developed rapidly. In particular, the US has basically achieved self-sufficiency in oil and gas, and the largest importer of oil and gas has started to shift to a net exporter. These factors have led to a significant increase in global oil and gas supplies.

It's not the external factors such as climate policy or electric cars that led to lower oil prices, the IEA's executive secretary, Fatih Birol, said of the causes of the oil price crisis, it was the oil industry's own technological innovation that led to a surge in supply.

In the context of global supply and demand for oil and gas, oil producers should shift from pursuing production to pursuing lower break-even costs. Large-scale and low-cost producers will become the main axis of oil supply. According to the research of BP, these low-cost suppliers will be key to future oil market uncertainty. Its influence depends on three aspects: one is the cost and feasibility of the production of low cost suppliers; Second, the impact of its production increase on oil price and its economy; Third, the competition from high cost suppliers. According to data projections, the Middle East, Russia and the US, the three low-cost suppliers, are expected to account for 63 percent of the world's oil supply in 2035 from the current 56 percent.

Among them, the United States has become the core variable that affects the international oil market. Between 2008 and 2015, the us relied on the "shale revolution", which accounted for 70.6 percent and 43.2 percent of the net increase in oil and gas production in the world. Since the fall of oil prices in 2014, the shale producers of US have shown extraordinary levels of innovation and resilience in dealing with short-term market volatility. The response time for macroeconomic changes is not more than six months to 12 months. The cost of the barrel oil break-even costs fell to $40 to $50, it has become an important "mobile regulator" outside OPEC.

"The future of oil markets will be rebalancing, it depends on the two indicators: one is the slowdown in US shale production, the second is the extent of the decline in crude stocks." Dr Daniel yergin, vice-president of IHS Markit, said in the conference. Some experts point out that the pace of production of shale oil and gas in North America are likely to slow as oil prices rise in recent years.

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