2 Challenges U.S. Energy Businesses Cannot Ignore
Current U.S. Energy Outlook and Projections
Recent EIA reports have shown that the U.S. has overtaken both Saudi Arabia and Russia in oil production. U.S. shale oil production has risen to record levels, and natural gas production will also increase dramatically in the next few years. As these production volumes increase, U.S. energy demand is growing at a much slower rate. And as domestic production is expected to rise by several million barrels of oil per day (BOPD) in the next few years, much of the new production will be exported, putting the U.S. on the fast track to becoming a top five oil exporter.
For around a decade, the U.S. natural gas industry has been moving toward an export-based economy to deal with excess supplies. Now that the region’s crude oil market has followed suit thanks to the lifting of export restraints in 2016, the U.S. is on the path to becoming one of the world’s largest exporters of LNG and NGLs, and petroleum.
While these trends bring vast opportunities for U.S.-based energy companies in the export market, they also present new challenges, including the following:
- Production is outpacing the construction of gathering and transportation infrastructure. As a result, new logistics challenges will force businesses to manage their supply chains differently as they navigate higher costs and constrained capacity in rail and truck transports. In order to successfully navigate these new complexities, oil and gas companies will need to better track, understand, and manage their logistics to maximize profitability. Additionally, energy consumers must find innovative ways to manage their inventories and the logistics associated with those inventories, as well as day-to-day operations, to remain profitable.
- The entire U.S. energy market is now integrated with the world market. This means producers now have the option of exporting crude oil to other markets where their prices exceed domestic prices by more than the additional transportation costs. Similarly, thanks to LNG, producers now have the option of exporting their gas production. However, large consumers of fossil fuels now have increased optionality as the U.S. is a more stable supplier of those fuels than other countries like Iran, Libya, and Venezuela. As a result, large domestic fuel consumers must consider energy prices and logistics costs around the world when evaluating decisions around the distribution and consumption of natural gas and other fuels. International companies have always had to consider this factor, but many segments of the U.S. energy industry have only considered the domestic market for decades until recent years. Foreign energy prices and logistics costs become even more complicated when considering multiple currencies. That said, U.S. energy businesses and large fuel consumers must have a robust commodity management solution that can handle these complexities.
As the U.S. continues to integrate into the world energy market, supply chain and logistics management will increase in complexity, which means businesses must be equipped with real-time portfolio visibility and advanced analytics.
The bottom line: Enterprise commodity trading and risk management software (also known as CTRM software or ETRM software) that provides you with total control and complete visibility across marketing, trading, logistics, inventory, accounting, and settlement for both domestic and international operations can help you mitigate risk and capitalize on growth opportunities as supply and demand patterns shift. Allegro offers these solutions – both out-of-the-box and customized for your business’ needs.
Interested in learning more about how Allegro’s solutions can help you navigate supply and demand imbalances? Click here to contact us.