Global economic slowing is the big wild card,'' says Daniel Yergin, chairman of energy consultancy Cambridge Energy Research Associates. All this spells trouble for oil-company earnings. Even if prices fall, some sectors of the energy industry are still poised for a boom. Another hot spot will be natural gas. But U.S. production has been flat for six years.
Big fields are hard to find and new technology depletes wells at much faster rates than in the past.
Electric utilities have begun to seriously consider other fuel sources, such as coal, for new power plants. Given the tightness across all petroleum markets, the coal industry could see one of its best years in decades. Gasoline is likely to remain in tight supply as well. While falling oil prices will translate into lower prices at the pump, strong demand for gasoline is bumping up against an industry that has seen capacity shrink in the past 20 years. In 1980, the U.S. refining industry produced 18 million bbl. per day.