There are few years in recent memory as volatile for the oil and gas industry as 2022. Rising and falling consumer demand, supplier cuts, and geopolitical issues are always in play. But unforeseen events like the Russian invasion of Ukraine and negotiations over a new Iranian nuclear deal have complicated 2022 in innumerable ways. Couple this with lingering COVID issues, China’s “zero-COVID” policies, and decarbonization efforts, rounding out 2022 is going to be a bumpy road.

Moving into 2023, four risks are front and center for oil and gas.  

Global Supply

Tight supply has driven oil north of $100 per barrel. Analysts expect volatility to remain but excess supply at some point in December to early 2023 is not out of the question. If OPEC moves ahead with its commitment to continue undoing the 2020 supply cuts and US production grows, a potential oversupply scenario is in play. If a new nuclear agreement with Iran progresses that could also add a million barrels a day within months of the new pact being struck. 

European and Russian Tensions

In late 2021 the reduction of Russian spot gas sales to Europe resulted in record natural gas prices for the EU. Tensions with Russia over Ukraine could keep prices high and the resulting paths are not overly obvious. There is a scenario that Europe would delay green transition energy policies to put off short-term pain. Yet, one could also envision a scenario where green transition policies are accelerated to decouple from Russian gas once and for all.  

Activist Impact

Governments have been tightening the screws around the oil and gas industry for decades. But it might be the activist contingent come 2023 that could leave the greatest impact. The activist sector has always been present, but activist investors with deep pocketbooks are a relatively new phenomenon. Investment dollars moving toward green energy are hitting record highs and social media platforms are the ideal avenues to spread their message. A handful of folks have posited that while small oil and gas firms get squeezed out due to social pressures, this could be favorable for the larger oil and gas players as someone will need to pick up the demand. 

Talent Shortage

An aging workforce, limited new talent, and competition (especially from the tech industry) for talent are compromising the larger industry. According to Brunel International Oil and Gas Job Search, 43% of current energy employees would like to leave the industry over the coming five years, 56% said they’d consider employment in the renewable sector, and 85% of university students considering a career in oil and gas indicated it is important that their employer’s policies align with addressing climate change. Of the four risks, this might be the single greatest issue oil and gas will face this decade.