Sunday, June 23, 2024

"What oil bust?"

It's all dependent on politicians. Should they impose Pigouvian taxes or other schemes to raise prices, glut turns to scarcity pretty fast. That's the reason our first inductee to the Climateer Hall of Fame was Senator Simon Cameron D and R of Pennsylvania:

Our Hero
Simon Cameron

"The honest politician is one who when he is bought, will stay bought."

From Reaction Magazine, June 21:

The International Energy Agency says it is “leading a new era of international energy co-operation.” There’s clearly a lot of leading to be done, with Russia using its oil to wage war on Ukraine, but you can hardly blame the IEA for trying. Earlier this month, it produced its bumper oil annual, predicting that “oil markets are on course for a major surplus this decade”. The Times reported this as a “staggering” surplus, while OPEC+, the oil producers’ cartel, called it “dangerous.” Certainly, if the IEA is right, there’s a big danger to the producers’ balance sheets.

It is quite brave of the IEA to keep sticking its neck out over prices, year after year, since its record is, well, mixed. In 2019, it concluded that there was “no peak in oil demand in sight”. The next year, Covid had dented that expectation, and the verdict was “demand expected to contract.” By 2021, “demand is set to rise every year through 2026”. This bold forecast was qualified with “stronger policies and behaviour changes could bring on a peak in demand soon.” Well, who’da thunk it?

It is too easy to mock others’ forecasts, as any forecaster knows. But let us suppose that this time the IEA is right, while OPEC+ is just whistling to keep its spirits up, and that we are headed for a lasting glut of oil (and gas). The obvious consequence will be falling prices. For the world’s most important commodity, that would have quite an impact. The massive transfer of wealth from a few producers to everyone else would stimulate growth all over the place, so bring it on.

Yet it is not only the producers who would suffer. Cheap oil would deliver a body-blow to net-zero ambitions everywhere....


Here's the IEA along with Bloomberg's Javier Blas, June 18:

Javier Blas: "Saudi Consumption — Not Production — Is Key to Peak Oil"