Oil price - Temporary upwards blip OR the only way is up?

[Motorsport3]

What is the consensus of the forum regarding the oil price?

While I appreciate geopolitical developments and global inflationary pressure are driving at the moment prices higher, I've been reading articles that essentially say that higher prices are almost welcome as they are the necessary catalyst for green energy transition.

Big oil is advertising their green energy diversification initiative which investment community seem to cheer. Therefore lack of hydrocarbon investments is possible. I wonder whether the dynamics are explosive for the oil price.

 

[Nibby]

The 'Green' bit is beginning to p**s people off. The fact that my energy supplier boast about some of it being 'green energy' just annoys people when they've been jacking their prices up through the roof and the same is going for petrol/diesel. It seems mention the word 'green' and you can do what you like with the price. Soon people won't be able to afford to heat their home or go for a Sunday drive but will be so happy in the knowledge that the supplier boast of it's green credentials. Not.

 

[conaero]

My feeling is the oil producers know the writing is on the wall with maybe 10 years of high supply required then it will tank as demand falls, so I feel they will milk it for everything they can get.

Governments will also raise tax to push people towards electric and thus milk it too.

 

[safrane]

Long term push for more profit to off set the masses of debt from COVID and no doubt taxes will go up to.

There is close to zero political support for making petrol cheaper and any government help to lower prices will go on Gas and Electricity

 

[TimR]

Oil retreats from 7-year high as Russia says it withdraws some troops

Oil tumbled over 3% on Tuesday, retreating from a seven-year high after Russia said some of its military units were returning to their bases following exercises near Ukraine, a move that appeared to de-escalate tension between Moscow and the West.

www.reuters.com

 

[zagatoes30]

Energy is just going to get more expensive, from a genuine perspective of more research into cleaner energy through companies and governments taking their margins in profit or tax, until we all get use to the fact that we need to use less. We have become addicted to energy on tap. I know we can't go back to the dark ages but something needs to fundamentally change in our approach but we have noticed since our move to Ireland that we source much more locally and we travel less distance to get the things we need, even eating out is much more local.

 

[GeoffCapes]

The bottom line for me is that NIMBY's need to get off their high horse.

You either have a nice view and pay a fortune for your energy or you put solar PV farms and wind turbines up with battery storage and not pay a fortune for your energy.

Simple as that.

 

[Zep]

For me, the increase in oil is based on a huge drop in demand and therefore production due to Covid. Production of oil and other commodities has not kept pace with the reopening and so we are seeing shocks in the system.

Smarter people than me are saying that this will be the main driver for the next 12-18 months. Once that is out of the way, whatever is left in terms of price increase can then be considered structural change to our economies.

 

[Scaf]

The bottom line for me is that NIMBY's need to get off their high horse.

You either have a nice view and pay a fortune for your energy or you put solar PV farms and wind turbines up with battery storage and not pay a fortune for your energy.

Simple as that.

I pay more for greener energy, not less.
If and when green energy is cheaper to produce the cost will rise to secure government tax revenues.
Remember when diesel was cheaper (until everyone switched to it) and now with EV’s, they are already making noises about list tax revenues, when the majority have them, they will be taxed just like all vehicles before them.
I agree with @Zep in that current shortage of supply and therefore demand lead price increases is a function of a market disrupted by covid etc

 

[TimR]

The Germans have been paying the highest prices for their energy of any European nation anyway, for at least the the last two decades..probably longer. The cost of sustainable energy with all it entails...

 

[TimR]

For me, the increase in oil is based on a huge drop in demand and therefore production due to Covid. Production of oil and other commodities has not kept pace with the reopening and so we are seeing shocks in the system.

Even this cannot explain the fluctuations- in both demand or price..
When lockdown was first widespread, oil demand fell sharply. Production was not reduced and storage was a problem...so cheap oil was plentiful. OSingle use plastic production also spiked..
Capitalism is a self serving master. Money, or money...or indeed, money !

 

[FIFTY]

The Germans have been paying the highest prices for their energy of any European nation anyway, for at least the the last two decades..probably longer. The cost of sustainable energy with all it entails...

Yet they have the highest % of coal power usage in Europe and they are heavily reliant on Russian gas. The Germans have been paying for green washing.

 

[TimR]

Early adopters of wind energy in fact...

 

[Zep]

Even this cannot explain the fluctuations- in both demand or price..
When lockdown was first widespread, oil demand fell sharply. Production was not reduced and storage was a problem...so cheap oil was plentiful. OSingle use plastic production also spiked..
Capitalism is a self serving master. Money, or money...or indeed, money !

I dunno. Production must have been slashed. There isn’t that much slack in the system for storage. It is, as I understand it anyway, a very long “just in time” supply chain. The world uses 97 million barrels of oil a day right now. This dropped by, on average, 13 million barrels a day in 2020. That’s 2045 million litres a day that would have had to go into storage if production wasn't cut back. The largest oil tankers in the world currently (TI Europe and TI Oceana) carry just over 500 million litres, so it would take 4 of them a day to store the over capacity.

 

[Zep]

As for Germany and green power, they might have been early adopters of wind power, but also the worlds largest producer of lignite coal and their energy mix of late has been heavily impacted by their decision to close all of their nuclear reactors in the wake of the Fukushima accident. Not a good example tbh.

 

[TimR]

Possibly- given the more recent decisions in Germany..
The association of cost and it’s being tied to sustainable energies should be clear enough...
Plus they have an economy that actually manufactures ( or did, until everyone adopted zero carbon by farming their emissions to Chinese production for cost and a clear conscience cough splutter)

I dunno. Production must have been slashed. There isn’t that much slack in the system for storage. It is, as I understand it anyway, a very long “just in time” supply chain. The world uses 97 million barrels of oil a day right now. This dropped by, on average, 13 million barrels a day in 2020. That’s 2045 million litres a day that would have had to go into storage if production wasn't cut back. The largest oil tankers in the world currently (TI Europe and TI Oceana) carry just over 5 million litres, so it would take 409 of them a day to store the over capacity.

That’s what Im saying...tankers circling the ports as nowhere to dump it!
OPEC insisted on no reduction of barrel count. Crazy

 

[allandwf]

Seen it all before .

 

[gb-gta]

I pay more for greener energy, not less.
If and when green energy is cheaper to produce the cost will rise to secure government tax revenues.
Remember when diesel was cheaper (until everyone switched to it) and now with EV’s, they are already making noises about list tax revenues, when the majority have them, they will be taxed just like all vehicles before them.
I agree with @Zep in that current shortage of supply and therefore demand lead price increases is a function of a market disrupted by covid etc

EV charging is just going to be taxed more of course, to replace fuel duty.
They already quietly slipped out a bill in dec 21 about EV charging rules from June 2022.

From then all charging for EV’s need to be metered seperately from domestic electricity, via smart meters. It also states they can manipulate rate of charge to your EV if they want to dependant on demand in the system. They can even also take electricity from your car if they want to!

But clearly the main reason for this will be to apply different tax rates on domestic and EV electricity in the (probably very near) future.

 

[Zep]

That’s what Im saying...tankers circling the ports as nowhere to dump it!
OPEC insisted on no reduction of barrel count. Crazy

OPEC did reduce production. As did everyone else.




There are only 800 odd large tankers in the fleet, so about 2 days of over production and they would have been hiding the barrels in the cupboard otherwise.

 

[TimR]

Well I’m not going to argue with you but that’s the opposite of what was reported at the time ( or very short,y after the lockdown )
What is clear perhaps is the scale of the operation..On that basis, if someone farts, the supply chain wobbles and febrile market shares are explained any which way...