Editorial: Winter Is Coming - A Game Of Sheikhs And Shale

Tim Haïdar

As winter draws in in the Northern Hemisphere and temperatures begin to drop, the price of oil and natural gas has, counterintuitively, gone in the same direction as the mercury in the thermometer.

Oversupply has been the cry as Brent hovers precariously close to the $80 mark and natural gas prices hit a four month low. The surfeit of hydrocarbons on the market is a twofold story – that of a booming shale sector in the United States, and of an OPEC that ramped up its output by the most in 13 months this September.

While the immediate effect has been to reduce the cost burden on cash-strapped consumers at the pump and the thermostat, a further ten dollar diminution could stymie the development of new unconventional opportunities in the US, and indefinitely postpone any such activity in Europe.

And all this bodes ill for the companies heavily bought into the unconventional oil and gas arena, a lot of which are highly leveraged. If bad comes to worse, the rapacious intent of traders and quants will turn to these distressed entities and the words "default" and "restructure" may become epitaphs for the trailblazing organisations that turned rock into oil and then into gold.

So is this this bout of hydrocarbon pricing dicing with death, a case of geopolitical brinksmanship? The age-old topos of East versus West played out on the energy battlefield in a return to the 1970s? Or is it simply the fact that when there is an overabundance of a commodity based on scarcity, the industry will always be setting itself up for a fall?

Turn the heating up and fill up your tank, it’s going to be a long winter ahead….

Will low oil prices bust the unconventional boom? And is it by chance or by design? Have your say here