As far as one-time Energy Secretary Spencer Abraham is concerned the rumors of OPEC’s demise have been greatly exaggerated.
“People who say OPEC is dead are dead wrong. They are evolving,” Abraham told about 100 guests of The Economist’s World in 2016 Breakfast, held Wednesday in Houston.
Abraham, who is also a former Republican senator from Michigan, said the energy industry is facing a starkly different set of circumstances now than when he served in the George W. Bush administration from 2001 until early 2005.
“Ten years ago, we regarded creeping prices of gas as a bad consumer indicator,” he said. “Today, we are looking at something very different.”
Abraham said he saw little indication Saudi Arabia would abandon its production policies in the near-term and added that by driving down prices by increasing supply OPEC was successfully forcing some of its competition to reconsider plans to grow.
“They (OPEC nations) produce and force higher-price producers to cut back,” he said, citing the recent cancellation of some offshore projects as an example.
On the topic of alternative fuels, Abraham said he believed solar energy was making inroads but with natural gas at $2 per MMBtu, anyone considering such a transition would be looking at “a big hit.”
As for the industry in general and specifically its hub city of Houston, Abraham said, “experienced people know cycles are inevitable. New people are shocked that it isn’t always going in the right direction.”
– Michael Reed, Managing Editor