American Oil and Gas Reporter - December 2018 - 95

Economist Sees Oil Growth To 2035
BRANSON, MO.-A generation ago,
most economists saw the world through a
peak oil supply lens, and expressed concern
about a future in which every year would
yield less of the nonrenewable resource than
the year before. However, Russell Evans, an
associate professor of economics at Oklahoma
City University, warned the Oklahoma Independent Petroleum Association that a
time of peak demand could confront oil
producers in fewer than 20 years.
Even so, he acknowledged, a peak
demand scenario still suggests oil will
remain a significant part of the economy
for decades after.
During a peak supply transition, real
inflation-adjusted oil prices rise steadily,
Evans said. As they climb, consumers
race to find alternative fuel sources, such
as renewables.
"We find ourselves in a peak demand
world, where the consensus is we will
transition away from fossil fuels as a
major power source long before we run
out of crude oil," he posed. "It is not a
supply issue now, it is a demand issue.
As time goes by, consumer preferences
will change and demand will diminish
slowly. As demand diminishes, real inflation-adjusted oil prices will decline."
In a peak supply scenario, price transitions typically are abrupt because of constant upward pressure that creates incentives
to find alternative sources, Evans noted.
In a peak demand transition, prices slowly
fall. Economists predict global demand
for crude oil will continue to grow, and
peak in 2035, followed by a slow decline.
"That means Oklahoma's identity as

Russell Evans, an associate economics
professor at Oklahoma City University,
tells the Oklahoma Independent Petroleum Association's fall conference that
several scenarios indicate crude oil will
remain a signiﬁcant part of the world's
economy for decades to come.

an energy state will linger for several
more generations," he posed. "There are
people in the state who think within a
matter of years we no longer will be an
oil and gas state because we will have diversified the economy. We are trying to
impress on Oklahoma policymakers that
they are going to be managing an economy
in an energy state for the next several
generations. There is no rapid transition
away from this economic identity."
In addition to a global economy transitioning to a peak oil demand phase,
Evans cautioned that a U.S. carbon tax
was becoming increasingly realistic. He
noted the country's fiscal situation-faced
with swelling Social Security and Medicare
obligations-pointed to the need for new
revenue streams. Evans said a carbon tax
and a value-added border adjustment tax
were the only obvious candidates.
"When you get to a U.S. fiscal situation
demanding additional revenues to account
for these underfunded liabilities, the first
thing you look at is the U.S. carbon tax,"
he indicated. "If a carbon tax happens, it
will not happen directly as a result of trying
to curb greenhouse gas emissions. That
would just be a pleasant secondary benefit,
but that is the most logical tax base to
address pressing U.S. fiscal challenges."
Road Safety
Also speaking at OIPA's fall conference
was Tim Martin, a risk control consultant
for Bitco Insurance Companies, who
identified automobile accidents as the industry's most significant hazard, both for
those involved in road incidents and their
employers.
"Auto coverage has the most claims
and the most litigation. One automobile
accident can affect all lines of coverage.
You could get workers' compensation
claims out of it, or there could be liability
claims if there is a spill," he said, adding
about 40 percent of fatalities reported in
the oil and gas sector during the past
several years involved transportation.
Martin cited an industry study that concluded the majority of traffic fatalities involved companies that employed fewer
than 20 people. Moreover, he continued,
most accidents involved pickups and workers
tasked to cover progressively more territory.
He pointed out companies increasingly
were shuttling workers to well sites in
high-occupancy vehicles, meaning one accident could affect a number of people.
"Of all people killed in auto accidents
this past year, around half were not
wearing seat belts. Seat belt use is not
very common in the oil field, and pumpers

are the worst," he described. "Pumpers
continually are getting in and out of their
trucks, opening and shutting gates, or
moving to gauge tanks."
Company owners can mitigate some
of those traffic risks by emphasizing driver
training, Martin said. Insurance companies
see lots of claims where oversized loads
damage bridges, he noted, and in most
cases it is attributable to a driver who
didn't know how much clearance he needed
or how to lower equipment being hauled.
As Oklahoma's oil and gas industry
continues to develop new production
areas, producers must face the challenge
of increased travel times for their workers,
Martin recommended. Some companies
have begun providing their drivers with
trucks equipped with sleeper berths, he
observed.
It is also possible to access federal and
state drivers' records, Martin said, noting
that while there are expenses involved in
pulling such documents, in the long run it
often proves worth the investment. Oklahoma charges $25 a request for checking
its records, and the federal motor carrier
website requires $10 to access an individual's commercial driver license.
"That will tell you if driver has had
any moving violations, and what maintenance issues they have had," Martin described. "That tells you a lot about the
driver; if they are not checking their truck
or properly securing their load, that is a
good screening tool. Also consider road
tests: Before you put a driver in a new
truck, it always is a good idea to run them
around the block, hauling a trailer."
r

Automobile accidents are the oil and
gas industry's most signiﬁcant hazard,
causing about 40 percent of fatalities
reported in the sector during the past
several years, Tim Martin, a risk control
consultant for Bitco Insurance Companies, says at the Oklahoma Independent
Petroleum Association's fall conference,
held in Branson, Mo.

DECEMBER 2018 95

American Oil and Gas Reporter - December 2018

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