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Fueling Growth: Energy Market Trends and Opportunities in 2023

May 25, 2023

In this Solutions InSight session from May of 2023, we’re joined by Tom Seng, Assistant Professor of Professional Practice in Energy at TCU in Fort Worth, to discuss the trends we’ve seen in energy in the first half of 2023 and what to expect in the second half of the year. From M&A activity, effects of inflation, impacts from the Inflation Reduction Act, and the state of the energy transition, our speakers cover the greatest challenges and opportunities facing the industry and how energy organizations can take action to better position themselves for success.

The oil and gas industry has come a long way over the last few years. During the first half of 2023, the energy market saw record natural gas production in the United States and managed to keep oil production levels above 12 million barrels per day fairly consistently. Global oil demand is set to increase, and we could see a new record for global oil consumption this year. Moving into the second half of 2023, we’ll see many opportunities in the energy market as well as some challenges.

State of the energy transition

Investing in ESG has attracted a lot of money in recent years, but we're seeing that turn, with some of those same investment firms returning to fossil fuel investments due to the profitability. The Energy Information Administration reported that in 2022, the total renewable energy (geothermal, solar, hydroelectric, wind, and biomass) consumed in the United States was less than 14% . The shift away from fossil fuels is still decades down the road, and the key to getting emissions under control in the near-term may come down to cleaning up the production of fossil fuels.

2023 energy market trends and opportunities

The Inflation Reduction Act contained some beneficial provisions for the energy market, such as mandating lease sales on federal properties and increasing the tax credits and incentives for investments in clean energy like wind, solar, geothermal, and carbon capture and sequestration. Without these subsidies, many renewables (such as EVs) wouldn’t survive in an open marketplace due to the costs involved in production. 
Hydrogen use in fuel cells is making advances as well. For example, a company called Nikola is looking at creating hydrogen fuel cell semi-tractor-trailers, and the Department of Energy has put out bids to establish four major hydrogen hubs in the United States. While hydrogen as a combustible fuel is still far down the road, we're seeing small advances in extracting and using hydrogen for fuel cell vehicles.
Carbon capture and sequestration is one of the biggest opportunities in the energy market. The Inflation Reduction Act boosted the incentives for carbon capture and sequestration under the 45Q bill, and we expect to see it take off because of the extra funding.

Challenges facing the energy market

While there's ample opportunity for carbon capture and sequestration, a positive step for the industry, the permit process for carbon capture and sequestration and permits for new pipelines are still dragging along at the federal level. We're also seeing a headwind in inflation as the federal government continues raising interest rates to help curb inflation. Raising rates impacts the cost of capital for oil and gas companies, and the challenge will be in creating a budget to maintain production levels while keeping free cash flow to satisfy investors.
While the future of the oil and gas industry looks bright, the energy market must stay on top of these developments in the coming years to remain competitive.

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