John Ballantine Jr.

Our energy worlds have experienced more uncertainty since the1973 OPEC embargo, the Iraq Wars, or 2015 Paris Climate agreements. Oil & gas remains the dominant source of energy as demand shifts and suppliers make huge investments in our evolving energy system. How do today’s players make their investment decisions and prosper in the long run?

The oil industry has faced a whirlwind of exogenous surprises over past decade: financial crises, changing climate agendas, regional conflicts, and the pandemic. However today much of the turbulence is generated within the oil industry: divergent producers operating with different investment parameters. Shale oil in the Midwest with shorter paybacks and lower development costs, compared to the Middle East and OPEC producers, or the North-Sea operators with huge investments, low break evens, and decade long returns. Today's oil & gas sector is characterized by players with dissimilar capabilities operating in a less well-organized market where they are the source of cyclicality and price volatility.

In this webinar, we discuss how an agent-based model brings more realism to the production and investment behavior than macro scenario models.

we focus on the heterogeneity of producers and why this results in different investment behavior
we show what this means for oil market imbalances due to lagged producer responses to demand changes and technology innovations

How well do our energy models answer our questions -- do they provide frameworks to analyze our energy challenges? What price, how much supply/demand imbalance, and where should we invest? Over the past fifty years, our energy models have evolved and become more sophisticated, however, the question remains, how well have they predicted prices and answered our changing energy (and climate) challenges?

In this slide podcast, I will briefly describe five energy models that have attempted to answer different questions at different points in time.

Hoteling and Hubbert: resource supply curve and decline/peaks
Adelman and oligopoly market structure: influence and impact of major players
Partial and general equilibrium: regional supply mix, market demand, and supply chains
VAR, price volatility, and complex oil market: supply and demand surprises with swing producers
Heterogeneous energy markets: Agent actions/behavior, game theory strategies
Of course, along with these models/frameworks, we have market analysts trying to pick the winning players. Looking back we know that none of these models have been able to fully capture the boom-bust cycles of our energy markets, nor predict prices in two to three years. Nonetheless, over the past fifty years, our models have been able to suggest new approaches. They have framed our thinking and helped some plan/invest in our changing energy landscape.