Oil prices headed to $100 or higher
The guest argued that oil prices are structurally headed to $100 per barrel or higher over the next several years due to a massive sustaining capital deficit.
The argument
The guest noted a sustaining capital deficit of roughly $1 billion a day over the last half-decade, which has led to steep production declines in key basins like the US Permian. This underinvestment, combined with the declining purchasing power of the US dollar, is expected to drive nominal oil prices significantly higher by 2028 or 2029.
The thesis, stress-tested
✓ What validates it
- ✓US shale rig counts failing to recover
- ✓Increasing constraints in Permian Basin production due to saltwater disposal capacity limits
▸ Risks discussed
- ▸Oil prices could experience marked short-term volatility and trade lower before heading higher
- ▸Operators may cannibalize themselves through excessive share buybacks and dividends instead of reinvesting in sustaining capital
Hear it yourself
"And so talking about nominal 90 or $100 oil prices, when, if you believe like I that the purchasing power of the US dollar is declining at eight or 10 compounded, it's not a very challenging ask."
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