Oil prices will return to $70 a barrel by the end of the year as American production declines and inventories are drawn down, Oklahoma oilman and natural gas supporter T. Boone Pickens predicted Thursday (April 30) during a question-and-answer session at the Arkansas Trucking Association’s Annual Business Conference and Vendor Showcase in Hot Springs.
Pickens said the United States is now largely energy independent counting its 125-year supply of natural gas and its shared oil market with Canada and Mexico. Because of new drilling techniques, the United States has increased daily oil production from 4 million barrels to 9.4 million barrels, collapsing the oil price and making the United States the swing producer – and not Saudi Arabia, which is not cutting production.
But the lower oil prices have caused the number of domestic rigs in operation to be cut in half since December, and domestic inventories have reached their highest levels ever and are about to be drawn down, he said. Production is declining. As a result, oil will be $70 per barrel by the end of the year. Pickens, who is nearly 87, predicted oil prices will reach $150 per barrel in his lifetime.
Pickens made his remarks as part of a sit-down interview with Craig Harper, J.B. Hunt executive vice president and chief operating officer and ATA chairman of the board.
Pickens told Harper he remembers climbing up a sign to change the prices at a gas station as a boy in Holdenville, Okla. At its lowest, gasoline was 11.9 cents per gallon while diesel was 6 cents.
Pickens has been evangelizing for natural gas since 1988 because it’s cheaper and cleaner than oil and available abundantly domestically. He self-funded a marketing campaign, the Pickens Plan, to encourage the end of American dependence on foreign oil.
But natural gas has struggled to gain a foothold in the American transportation market. Despite the lower fuel prices, motor carriers have stuck with diesel because of the lack of a fueling infrastructure, the increased costs of natural gas vehicles, the decreased power, and carriers’ reluctance to change.
But Pickens remains optimistic about natural gas’ future. The price will remain low long after diesel prices have increased. He said the rest of the world is far behind the United States in its ability to develop natural gas as a transportation fuel. Natural gas has become the fuel of choice for waste haulers because their fleets stay close to home fueling stations. Major carriers like UPS and FedEx are making major investments in the fuel.
“To me, the fuel of the future is going to be natural gas, not diesel,” he said.
Pickens offered views on a variety of other topics.
He criticized President Obama for vetoing the Keystone Pipeline and said the administration appeared headed toward making a bad deal with Iran, though he didn’t think Iran would be able to affect global oil prices much.
He said he had never voted for a Democrat for president and predicted that Hillary Clinton will not be elected. He said the United States should create a North American energy alliance with Canada and Mexico.
Pickens said he has no plans on retiring (“I’m only 87”) and advised against anyone doing so if they are productive and enjoying their job. He made most of his money after age 68, when he left the company he founded, Mesa Petroleum, got a divorce and started the BP Capital investment firm. After that, his net worth increased from $39 million to $5 billion. He said he has paid $665 million in taxes and donated $1 billion to various charities.