Fracking billionaire Harold Hamm has a dream scenario for U.S. domination of global oil, according to Forbes
It involves U.S. energy companies dialing back production in unison, and also being allowed to export their production to other nations for the first time in decades.
Hamm, the CEO of Continental Resources who has lost nearly half his fortune — about $7 billion — since the oil shock got underway in 2014, is optimistic these days, according to Forbes' Christopher Helman.
"Once you get by about a year here it's going to open back up again," Hamm told Helman. "Worldwide demand is going to catch up with supply. And this thing solves itself. We could be sitting here a year from now talking about an undersupply. It's very short term. Just doesn't feel that way."
The problem is that U.S. oil production is still growing, at 9.3 million barrels per day, up 1.2 million barrels daily from last year, as producers fulfil existing contracts in the face of prices that have dropped 50 percent.
But Hamm claims that pace will soon reverse itself, noting that some U.S. independent oil companies have announced plans to slash capital expenditures by 50 percent this year. Reports of layoffs in the fracking oil patch have also begun to percolate.
"Everyone sees it," Hamm noted. "All these publicly held companies are responding in the same way. It's not a matter of collusion; it's a matter of cohesion."
He believes the discipline to respond to demand is going to come from what he calls "Cowboyistan" — a region that encompasses the fracking fields of North Dakota, Oklahoma and Texas. Cowboyistan produces 3.8 million barrels of oil daily, making it the seventh largest oil producer globally.
In Hamm's vision, Cowboyistan could become the world's "swing producer," an entity that has the capacity and ability to add to supply in times of scarcity and take supply away in times of glut. That role has heretofore been held by Saudi Arabia.
"Once you stop drilling it doesn't take long for the natural decline rates to kick in," says Hamm.
Helman noted that while Cowboyistan cannot export its production to the rest of the world, being confined to the domestic market by U.S. export laws, it does serve American refiners who sell 4 million barrels per day of finished product like gasoline and diesel to foreign nations.
Helman suggested that industry defaults and consolidation in the U.S. oil patch might end up helping ease American overproduction.
Meanwhile, Hamm is lobbying Washington lawmakers to ease restrictions on U.S. oil exports. He sees continued foreign demand as helping take up some of the domestic demand slack.
"We need more supply. It's crazy to think that China and India won't continue to demand more oil," Hamm stated. "Even if overall economic growth slows, oil demand will grow, because they want something other than a bicycle; they want to farm with a tractor instead of oxen."
OPEC 's chief said the cartel's move to maintain its production in the face of slumping prices is hurting U.S. oil frackers, The Wall Street Journal
reported. He predicted global cuts in energy investment will lead to shortages that will eventually push the market back up.
"Projects are being canceled. Investments are being revised. Costs are being squeezed," said Abdalla Salem el-Badri, the secretary general of OPEC.
"If we don't have more supply, there will be a shortage and the price will rise again," he added.
© 2023 Newsmax Finance. All rights reserved.