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The world could be on the brink of an energy crisis rivaling the 1970s, says IHS Markit’s Yergin

March 4, 2022

  • Russia’s Ukraine invasion could have set in motion an energy market disruption on the scale of major oil crises in the 1970s, according to Daniel Yergin, vice chairman of IHS Markit.
  • Sanctions by the U.S. and allies on Russia’s financial system have disrupted sales of Russian oil, with banks and buyers wary of running afoul of the punitive measures.
  • “This could be the worst crisis since the Arab oil embargo and the Iranian revolution in the 1970s,” said Yergin.
A driver holds a fuel nozzle at a Shell gas station in San Francisco, California, U.S., on Friday, Feb. 25, 2022.
A driver holds a fuel nozzle at a Shell gas station in San Francisco, California, U.S., on Friday, Feb. 25, 2022.
David Paul Morris | Bloomberg | Getty Images

Russia’s Ukraine invasion could have set in motion an energy market disruption on the scale of major oil crises in the 1970s, according to Daniel Yergin, vice chairman of IHS Markit.

Moscow is one of the world’s largest oil exporters. Sanctions by the U.S. and allies on Russia’s financial system have already set in motion a backlash against Russian crude from banks, buyers and shippers.

Yergin, also an author and energy market historian, said even though Russian energy was not sanctioned by the U.S. and other countries, there could be a large loss of Russian barrels from the market. The country exports about 7.5 million barrels a day of oil and refined products, he noted.

“This is going to be a really big disruption in terms of logistics, and people are going to be scrambling for barrels,” Yergin said. “This is a supply crisis. It’s a logistics crisis. It’s a payment crisis, and this could well be on the scale of the 1970s.”

He said strong communications between governments imposing the sanctions and the industry could head off a worst-case scenario. “Governments need to provide clarity,” Yergin said.

…click on the above link to read the rest of the article…

Supply chain slowdown hits at key pillars of economy and will likely get worse: Dan Yergin

April 18, 2021

KEY POINTS
  • The pressures on supply chains are increasing and global disruptions are likely to only get worse as summer approaches and the economy booms.
  • Disruptions have converged at the same time in three important pillars of the global economy – shipping, computer chips, and plastics.
  • Port backups are described as the worst ever and delivery times are the longest in 20 years of data collection.
  • The system will ultimately adjust, but that will take time and requires new investment in ports and capacity.
Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, U.S., April 7, 2021.
Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, April 7, 2021.     Lucy Nicholson | Reuters

If you’re wondering why your new couch is going to take three or four months to arrive, not just a few weeks, the reason is simple:  You are at the very end of a global supply chain that has buckled.

For similar reasons, GM and Ford and other automakers around the world are slowing down manufacturing, temporarily shutting auto plants, and furloughing workers.

A recovering world economy that depends upon the synchronized, smooth running of global supply chains is now being slammed by what has turned out to be synchronized disruptions.

Although the massive Ever Given container ship has been unstuck from the Suez Canal, its continuing impact is only adding to the woes.

As government stimulus seeks to fuel a hyper recovery and the world economy accelerates over the rest of this year, the pressures on supply chains are increasing and disruptions are likely to grow as we head into summer.

Stretching supply chains   

…click on the above link to read the rest of the article…

IHS Markit: Oil Demand Won’t Fully Recover Until 2022

December 28, 2020

IHS Markit: Oil Demand Won’t Fully Recover Until 2022

Global oil demand will likely take another year or so to return to pre-pandemic levels—by late 2021 or early 2022, energy expert and IHS Markit vice chairman Daniel Yergin told Al Arabiya English in a video interview on Monday.

Yergin’s expectations for oil demand are roughly in line with the forecasts by the International Energy Agency (IEA) and OPEC, which don’t expect annual oil demand to return to the pre-COVID levels next year, despite the projected rise compared to this year’s slump.

Continued low demand for jet fuel will account for 80 percent of next year’s 3.1-million-bpd gap in oil demand compared to pre-pandemic levels, the IEA said in its monthly Oil Market Report earlier this month. OPEC also revised down its oil demand projections for this year and next in its Monthly Oil Market Report for December, expecting 2021 oil demand at 95.89 million bpd, down 410,000 bpd from its projection of 96.3 million bpd from November.

IHS Markit’s Yergin doesn’t see the biggest disruption on the oil market as either bringing forward or delaying peak oil demand.

“At the end of the day, it won’t have much impact on peak oil demand, which I still think will be around 2030 or so,” Yergin told Al Arabiya English.

The Pulitzer-Prize winning energy author also discussed the U.S. shale patch and the chances of it returning to the rapid growth in production in the years just before the 2020 price crash.

“Let me give you a very simple answer, the answer is no,” Yergin told Al Arabiya English when asked if U.S. oil production could return to 1.5-million-bpd annual growth.

According to IHS Markit, shale production will stay relatively unchanged at around 11 million bpd until late 2021, before it starts rising, but it will increase at a much more moderate pace.

“So that 1.5 million barrels per day, that two million barrels per day that was so disruptive for the oil market, that’s history,” Yergin told Al Arabiya English.

Yergin: Expect Extreme Volatility In Oil Markets

September 12, 2019

Yergin: Expect Extreme Volatility In Oil Markets

Flaring

Rising pipeline takeaway capacity in the Permian and global oil demand growth at its weakest in a decade are set to lead to more volatility in oil prices in the near term, a prominent energy expert said, joining a growing number of analysts who see prices further depressed by slowing economies and crude demand.

“The pipeline bottlenecks are in the process of being resolved, so a lot more oil is going to come onto the market by the end of the year. We expect the U.S. (crude oil output) to be up to 13 million barrels a day,” IHS Markit’s vice chairman Daniel Yergin told CNBC on Tuesday.

While U.S. production will continue to add more supply in an already oversupplied global market, on the demand side, expectations are getting increasingly pessimistic.

“We’re in one of the weakest periods since 2008 and we think demand growth this year is under a million barrels per day. So you have that factor at the same time as you have more oil coming to the market. So expect some volatility,” Yergin told CNBC in an interview on the sidelines of a conference in Abu Dhabi.

Despite expectations of volatility, IHS Markit’s vice chairman sees Brent Crude prices range-bound in the US$55-65 range.

Yergin is not alone in predicting substantially lower oil demand growth this year than originally anticipated.  

The International Energy Agency (IEA) revised down its demand growth estimates for 2019 in its latest Oil Market Report, by 100,000 bpd to 1.1 million bpd, after seeing that between January and May demand growth was just 520,000 bpd, the lowest increase for the period since 2008.     

…click on the above link to read the rest of the article…

10 years after the oil price spike: Is peak oil a process rather than a moment?

July 8, 2018

10 years after the oil price spike: Is peak oil a process rather than a moment?

Ten years ago this week—July 11, 2008 to be exact—the price of a barrel of oil on the New York Mercantile Exchange hit an intraday high of $147.27, its highest price ever. By the following autumn the world economy was in shambles and the price of oil was tumbling. The oil price eventually bottomed out around $34 per barrel in mid-February the following year.

Oil prices started 2002 around $20 per barrel and then rose almost continuously until mid-2008. As they rose, the world’s best known critic of peak oil* prognostications, Daniel Yergin, began to look so foolish for having predicted ample supplies for decades to come that his firm finally reversed itself in mid-2008 and began to forecast higher prices. That should have been read as a contrarian signal; just two months later the oil bull market ended.

Peak oil thinkers at the time believed that their forecast of a nearby all-time peak in the rate of world oil production had been fulfilled. The official numbers seemed to confirm this. Petroleum geologist Kenneth Deffeyes’ had made a half-serious prediction that Thanksgiving Day 2005 would mark the all-time high for production. Production of crude oil including lease condensate (which is the definition of oil) was slightly more than 74 million barrels per day (mbpd) in December 2005, but thereafter declined.

Despite high and rising prices oil production failed to exceed that number for two years. In December 2007 production inched above the previous high mark and stayed there through July 2008, the month the oil price peaked. That month the world produced slightly more than 75 mbpd.

In August production fell by more than one million barrels and did not surmount 75 mbpd until two years later.

…click on the above link to read the rest of the article…

IEA in Davos 2016 warns of higher oil prices in a few years’ time

February 9, 2016

IEA in Davos 2016 warns of higher oil prices in a few years’ time

World Economic Forum

The Transformation of Energy

Fig 1: WEF energy panellists

22/1/2016   From right to left: moderator Daniel Yergin (IHS), Fatih Birol (IEA), Hiroaki Nakanishi (Hitachi), Ignacio Sánchez (Iberdrola), Eric Xin Luo (Shunfeng International Clean Energy)

This recent forum was about how to transition away from fossil fuels, after the UN conference on climate change in Paris in November 2015. Moderator Yergin – who is a known peak oil denier – started by asking Fatih Birol what low oil and gas prices mean for the development of renewable energies. Fatih responded by first warning about the impact of lower oil prices on investments in the oil and gas sector:

(video 3:24)
Fatih Birol: “For the oil markets what worries me the most is that: last year we have seen oil investments in 2015 decline more than 20%, compared to 2014, for the new projects. And this was the largest drop we have ever seen in the history of oil. And, moreover, in 2016, this year, with the $30 price environment, we expect an additional 16% decline in the oil projects, investments. So, we have never seen 2 years in a row oil investments declining. If there was a decline 1 year, which was very rare, the next year there was a rebound”

Daniel Yergin: “What does that lead you to?”

Fatih Birol: “this leads me to the very fact that in a few years of time, when the global demand gets a bit stronger, when we see that the high cost areas such as the United States start to decline, we may well see and upward pressure on the prices as a result of market tightness. So my message, my 1st message is: don’t be misled that the low oil prices will have an impact on the oil prices in the market in a few years’ time”

…click on the above link to read the rest of the article…

Only Recession Can Prevent An Oil Price Spike

January 27, 2016

Only Recession Can Prevent An Oil Price Spike

The biggest result from the collapse in oil prices could be a future price spike.

Oil prices at $30 per barrel have put most producers under water. That has led to austere budgets and severe cuts to spending. Wood Mackenzie recently estimated that $380 billion in major oil projects have been delayed or cancelled since. That means that about 27 billion barrels that had been slated for production from those projects will now not be produced.

But more cuts are expected moving forward. “There has been a $1.8 trillion reduction in spending planned for 2015 to 2020 compared to what was expected in 2014,” historian and oil expert Daniel Yergin said at the World Economic Forum in Davos, according to the Telegraph.

The oil industry has long been spending beyond its means. The shale boom was made possible by the massive monetary expansion from the U.S. Federal Reserve since 2009, with near zero interest rates allowing nearly every mom-and-pop driller to access credit. The result was a surge in oil production. Many companies struggled to be profitable before the collapse in crude oil prices. Now most are losing money on every barrel sold.

But the problem is that the market will overcorrect. The $1.8 trillion cutback in spending that Daniel Yergin cites will lead to a shortfall in supply in the coming years. The world needs to replace about 5 percent of total production each year just from natural depletion. That is somewhere around 5 million barrels per day (mb/d) each year in new output.

Moreover, demand is expected to rise. The IEA says that oil demand grew by at a five-year high of 1.8 mb/d in 2015, and while that is expected to slow in 2016, the world will still consume an extra 1.2 mb/d of oil this year. That will continue to rise. Assuming a little more than 1 mb/d each year in new demand growth, the industry will need to supply an additional 7 mb/d by 2020.

…click on the above link to read the rest of the article…

Why The U.S. Can’t Be Called A ‘Swing Producer’

January 7, 2016

Why The U.S. Can’t Be Called A ‘Swing Producer’

They are wrong. It is preposterous to say that the world’s largest oil importer is also its swing producer.

There are two types of oil producers in the world: those who have the will and the means to affect market prices, and those who react to them. In other words, the swing producer and everyone else.

A swing producer must meet the following criteria:

• A swing producer must be a net exporter of oil.

• A swing producer must have enough daily production, spare capacity and reserves to influence market prices by balancing supply and demand through increasing or decreasing output.

• A swing producer must be able to act authoritatively and quickly to increase or decrease output.

• In the real world, a swing producer is a euphemism for a cartel. No single producer has enough oil leverage to balance the market and influence prices by itself. That includes Saudi Arabia, Russia, and the United States, the top 3 producers in the world. Obviously, it also includes U.S. tight oil.

• A swing producer must have low production costs and have the financial reserves to withstand reduced cash flow when restricting or increasing supply is necessary to balance the market.

So, let’s go down the list for OPEC and U.S. tight oil.

Related: 10 Key Energy Trends To Watch For In 2016

OPEC’s net exports for 2014 were 23 million barrels per day (mmbpd) (Figure 1). U.S. net exports were -7 mmbpd. In other words, the U.S. is a net importer of crude oil. A net importer of oil cannot be a swing producer.

Figure 1. OPEC and U.S. 2014 net crude oil exports.
Source: OPEC & Labyrinth Consulting Services, Inc.

(Click image to enlarge)

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Peak Oil: What Does Any Of This Mean? – Peak Oil Matters

December 5, 2014

Peak Oil: What Does Any Of This Mean? – Peak Oil Matters.

Daniel Yergin’s Pulitzer Prize (for his book The Quest) has earned him a fair amount of street cred, judging by how often his opinions are solicited on the state of fossil fuel supply and production. I haven’t read the book, but I’d be lying if I said that anyone worthy of a Pulitzer Prize doesn’t merit a measure of respect regardless of what one thinks of her or his opinions or ideologies.

When Cornucopians have run out of the few partial- or pseudo-facts they rely upon as the foundation for the magnificent spin they place on finite resources and reality, after a while the lines blur between plausible and “huh?” It would appear that major literary rewards does not make one immune to that assessment, nor elevate them to a position where they are not obliged to resort to the same puffery and light-on-facts commentary so prevalent in our public discourse on peak oil and climate change, among other issues of considerable impact.

Earlier this year, we were treated to the observations below by Mr. Yergin in aninterview conducted by McKinsey. My comments follow in [ ].

To his credit—and at least from my observations in reading a dozen or so articles of his over the past few years—he does have a broader perspective on how we must meet our energy needs in the future.

But like too many of his peers, the unwillingness to address not just specifics, but acknowledge the limitations and legitimate concerns of fossil fuel production (which he must certainly understand) winds up doing more of a disservice to the public than anything else. If presumed experts are telling only part of the story, what’s the point?

…click on the above link to read the rest of the article…

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