The global order of the energy industry is shifting and where the Permian Basin will fit in is an intriguing question.
It will of course be very important, but in what relation to Russia, Saudi Arabia and the other members of OPEC and OPEC-Plus?
How will Europe and Asia factor in with their massive and ever-increasing needs for power?
The infrastructure from war damage in Iran, Qatar, Saudi Arabia, the UAE and Bahrain will eventually be repaired, but how long will it take and will the global order return to pre-war conditions or will it be altered?
Waco economist Ray Perryman and Odessa oilman Kirk Edwards say big changes are taking place and the Basin is gaining prominence.
In assessing the long-term viability of the Permian Basin, Perryman said, it is useful to take a step back from the daily headlines and focus on fundamentals.
“The U.S. and other advanced countries, especially in Europe, are seeing explosive demand for energy in response to the rising investments in AI infrastructure,” he said. “The emerging nations of the world will require enormous energy resources as they experience greater development and raise vast populations out of poverty.
“Even before the AI boom, most credible forecasts were showing the need for greater usage of oil and gas even as other sources saw explosive growth. At the same time, climate concerns are very real and must be addressed.”
Juxtaposing the situation in the Basin against those facts, Perryman said, it becomes obvious that it will be a vital force in meeting global energy needs for the foreseeable future for a variety of reasons.
“First, there are vast untapped reserves in the region which will expand significantly as new recovery technologies come into operation,” he said. “Second, the carbon properties of the resources in the Basin are far superior to many major production areas in the world, a factor which will drive investment dollars going forward.
“Third, the geopolitical environment in the U.S. is much more stable and predictable that those in other regions with substantial reserves, which provides a further basis for reduced risk and favorable investment conditions.”
Perryman said there will certainly be ebbs and flows based on market conditions, the timing of technology deployment and geopolitical disturbances.
“All of those will occur, however, within a framework that supports the long-term viability of the Permian Basin relative to other major production areas,” he said.
Edwards said the global energy order is indeed changing and the Permian Basin is becoming more important, not less.
“For decades the world viewed Saudi Arabia, Russia and OPEC as the primary swing suppliers capable of stabilizing global energy markets,” he said. “The events of the past several years, culminating in the current Middle East conflict, have demonstrated that energy security is increasingly dependent on reliable production from politically stable regions.
“The Permian Basin sits at the center of that equation.”
If the United States did not have the production capacity of the Permian today, Edwards said, the global economy would be facing a far more severe energy crisis.
“While major portions of Middle Eastern oil and LNG infrastructure have been disrupted and the Strait of Hormuz has constrained exports, U.S. producers have continued supplying both domestic and international markets,” he said. “In many respects the Permian has become the world’s most important incremental source of oil and associated natural gas.
“Recent market disruptions have highlighted how critical U.S. shale production has become to balancing global supply.”
Edwards said Europe and Asia will continue to be major drivers of energy demand.
“Despite aggressive renewable energy investments, both regions still require enormous quantities of oil and natural gas to power their economies, manufacturing sectors and growing data center infrastructure,” he said.
“Asia in particular remains heavily dependent on imported energy, making reliable supply chains more important than ever.”
Edwards said recent disruptions in Middle Eastern oil and LNG exports have reinforced that reality.
“The damaged infrastructure in Iran, Qatar, Saudi Arabia, the UAE and Bahrain will eventually be repaired, but energy markets rarely return completely to their previous state after a major geopolitical shock,” he said. “Some facilities may take years to fully restore and customers around the world will likely diversify supply sources to reduce future risk.
“Global investment is already shifting toward regions viewed as politically stable and commercially dependable.”
When this conflict finally ends, Edwards said, the world will not simply revert to the pre-war energy order.
“The United States and particularly the Permian Basin will emerge with greater strategic importance,” he said. “The lesson for policymakers should be clear: America’s energy security and economic strength depend heavily on maintaining a healthy domestic oil and gas industry.”
Rather than looking first to countries such as Venezuela or other geopolitical competitors for additional supply, Edwards said, the U.S. should recognize that its greatest energy advantage already exists at home.
“The Permian Basin has proven that it can respond faster, more reliably and under stronger regulatory and geopolitical stability than virtually any producing region in the world,” he said. “The world still needs Saudi Arabia.
“It still needs OPEC. It still needs global cooperation. But the Permian Basin is increasingly becoming the indispensable cornerstone of global energy security.”
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