The global oil market is experiencing a structural shift. Faced with a rapid price decline, large oil-producing countries have moved to protect their market share with the hopes of permanently removing expensive supply from the market. Meanwhile, the ability of the US shale oil producers to respond quickly to positive price signals puts downward pressure on prices. On the demand side, advances in renewable technology and the continued effort to curb fossil fuel consumption inhibit long-run growth. These factors suggest that the current down cycle may continue for an extended period of time or even invoke another down cycle.
In this article appearing in the September 2016 issue of Natural Gas & Electricity, authors Dr. Sang-Won Kim, Dr. Brad Powley, and Léonard Bertrand argue that asset portfolios that are resilient to disruptive events – like broad swings in commodity prices – will become an increasingly important competitive advantage.