The global energy crisis has spurred gas and coal prices around the world, accelerating the rebound in London and New York benchmark oil futures to their previous highs.
Moreover, Bank of America predicts new heights here and expects the price of Brent oil at $ 120 per barrel in mid-2022.
– The US authorities will do everything possible to prevent this from happening, and will even try to lower the price of oil below $ 80 per barrel, – believes Analyst of FINAM Group Alexey Korenev:
– Sometimes completely unexpected factors affect the price of oil. We all remember the spring of 2020, when oil collapsed from $ 80 to $ 25 due to the pandemic. And then in a year, since November last year, it went from $ 36 to $ 86. Therefore, a single factor can cancel out a thousand arguments for one or another forecast.
Now there is an energy crisis. And when Bank of America makes its forecasts, it relies, first, on the previous dynamics, approximating it for future periods. But this is not always correct. Because historical experience does not necessarily mean that the future will be the same.
Now China uses energy according to the principle “as much as they sell” and at any price. And other countries of Southeast Asia are recovering fairly quickly from the crisis. If everything continues in this direction, then – yes, the prices of oil and other hydrocarbons will grow. That is, the rates of demand turn out to be higher than those planned by OPEC. And if they persist, then oil may indeed go beyond the $ 100 mark.
“SP”: – How will OPEC react?
– This is another moment. On November 3, there will be an OPEC meeting, where the volumes of production by the OPEC plus countries will again be discussed. And Russia and Saudi Arabia have already come out in favor of not increasing production, so that it is kept in the previously agreed volumes. Since the increase in production volumes will immediately hit oil prices, they will go down. Except
The United States, Russia and Saudi Arabia are the main oil producers, and, of course, they are interested in high prices. In our country, not only exporters are interested in this, but also the budget, which largely depends on the proceeds from the sale of energy resources. But the United States has sharply criticized the positions of Russia and Saudi Arabia. And the president Joe Biden has already warned that he will negotiate with the rest of the OPEC member countries to push the increase in oil production at a faster pace.
Biden said current fuel prices are hitting the pocket of US consumers. At the same time, the American president used such a trick, pressed on a tear, noting that the position of Russia and Saudi Arabia makes the poor strata of Americans even poorer. And he even mentioned that many parents would not be able to afford to take their children to school, not only by car, but also by school bus.
So the US will fight to increase production, which will stop the rise in fuel prices. Therefore, we are looking forward to the OPEC meeting.
Personally, I see projected oil prices in the $ 80- $ 90 range. But if the Americans manage to put pressure on OPEC, then the price for it may drop below $ 80.
“SP”: – What will all this mean for our country, for the Russians?
– The high price of oil is a plus for the oil industry and the budget. But with the growth of fuel, the logistics costs rise. And the cost of any production rises in price, where energy is consumed, and it is consumed everywhere. On this side, expensive oil will have a negative impact on the inflation rate, because the rise in costs is always the rise in consumer prices.
– The logic of the rise in oil prices is quite clear. It consists, firstly, in the fact that because of covid in 2020, no one made investment decisions on the production of hydrocarbons, – believes expert of the Financial University under the Government of the Russian Federation and the National Energy Security Fund Igor Yushkov:
– Even in current production, in existing projects, investments for their maintenance have been significantly reduced, not to mention new projects. That is, no one started new projects either in 2020, or even now in 2021. In fact, for two years now the world has been doing without any investments in new production projects.
This, of course, leads to the fact that the production potential is decreasing, even now, within the framework of OPEC, more and more countries appear, for which production quotas are increased, but they themselves cannot increase production. Deepwater projects in Brazil, a number of other projects, and primarily offshore ones, suffered. Therefore, even now the world is faced with the fact that there is a big question – will we be able to increase the volume of production?
Well, and besides, this whole covid story is superimposed on it – a total lack of making investment decisions. And this is also due to the general fear of oil companies, which is caused by the accelerated transition to green energy – they are told that soon no one will need your oil and gas at all, so there is no need to invest in it.
And the oilmen really think – you never know what will happen next, suddenly the world will soon begin to abandon hydrocarbons on a large scale, competition among the remaining oil suppliers will increase, oil prices will fall, we will not return our investments.
“SP”: – The oil industry does not fit into world trends?
– Oil workers are openly pressured, squeezed out of the energy balance. It’s a shame to extract oil, everything is totally renamed. For example, Total changed its name to TotalEnergies to emphasize its commitment to minimizing environmental damage. But the worst thing for oil companies is the change in the rules of the game in the banking sector.
That is, banks now either stop giving them loans for new production projects altogether, or give them, but at an increased rate. And due to the increased rate for the oil and gas and coal sectors, they subsidize RES projects (renewable energy sources), lending them at a reduced rate. It turns out that for oilmen their projects a priori are already becoming more expensive.
And one more thing – the oil companies are afraid that they will be sued. There is such a precedent with Shell, which was sued by a Dutch court. Shell had a decarbonization program, that is, the abandonment of the production and use of hydrocarbons. But the Dutch court said that this is not enough, let’s do it faster, reduce consumption more, emissions
Against this background, there are questions about the volume of production. But with all this, consumption is being restored. In 2020, at the height of the coronavirus, it was predicted that the peak of oil had passed and the volumes of oil consumption would never return to the volumes that were in 2019. However, no, the world is recovering oil consumption. And even obviously increases them.
Therefore, the peak of oil has not been passed yet. And so it turns out that production is decreasing, and consumption is becoming more. Hence, there is a deficit and a rise in prices. The only question is whether there will be oil at $ 120 in 2022, but the rise in prices, such a trend is clearly there.
“SP”: – The climate summit, which is now in Glasgow, seems to be aimed at improving the environment, and on the street Greta Thunberg swears dirty, speaking in front of his colleagues, at the same time Joe Biden fell asleep while discussing climate problems …
– Well, Greta’s energy cannot be called pure. And Biden does everything consistently, logically – when you sleep, you breathe less often, respectively, you make less greenhouse gas emissions. Everyone contributes to the preservation of the climate as much as he can. But I think the summit’s results will not be fun.
“SP”: – Should we expect that soon investing in oil production will not only be risky for the image, but also clearly financially unprofitable?
– This process is already underway. There is a merger of banks, following the recommendation of the World Bank, according to which investments in hydrocarbon production have already begun to be called “sinful projects”, since they provoke an increase in greenhouse gas emissions into the atmosphere – they need to give loans only with increased interest rates and, in the future, generally refuse to finance this …
There is a possibility that in the future the companies will rely only on their own strength and will no longer be able to take loans. For now, Western banks will “contribute” to this, but this process is already underway on a global scale. It’s just that for now the banks themselves, according to their “feelings”, determine by what year they will stop financing hydrocarbon projects. And then, I think, the nuts here will tighten more and more.
In theory, we are sliding towards the fact that these global climatic stories are becoming real changes in the international trade system, the financial system. Here’s a carbon tax.
You used to make some stuffed animals using electricity from a coal plant in China, and you had a low production cost. This was a competitive advantage. And in Europe, the same teddy bears were sewn using renewable energy, then they were a priori more expensive. And now those who sew in China, leaving a carbon footprint, will pay a carbon tax, and those who use renewable energy will not pay this tax.
And it turns out the opposite is true now: cheap coal power generation has become a burden, and renewable energy has become a competitive advantage. Here you are, a change in the international trading system. And now they can regulate these processes in a new way with banking instruments. Therefore, at this summit in Glasgow, such things are discussed – how to synchronize and coordinate such actions.