Odd Lots The Oil Industry's Double Whammy of Higher Costs and Lower Prices
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May 15, 2025 
Peter Tertzakian, founder of Studio.Energy and an energy industry veteran, shares insights on the oil industry's current state. He discusses the paradox of rising production costs alongside falling crude prices that threaten profitability. Tertzakian explores the impact of geopolitical factors and market volatility, questioning the future viability of oil production. He also highlights the growing demand for liquefied natural gas as a key player in the energy landscape, while addressing talent challenges and the need for innovation in extraction methods.
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Profitability at $63 Oil Price
- At about $63 per barrel, the oil industry is marginally profitable but higher cost producers are shut down.
- Decision makers hesitate on investments due to uncertainty if prices will hold beyond a quarter.
Capital Funding Cycles Shifted by Sentiment
- Capital funding for shale boomed under low cost of capital but shifted when ESG and end-of-oil narratives rose.
- Current price drops dampen investor enthusiasm, stalling aggressive budget increases.
Drilling Boom Needs Cheap Capital
- Another drilling boom requires low capital costs and favorable financial conditions, which currently do not exist.
- Management remains cautious, closely observing market conditions without rushing expansion.