Catching up: Politics, European Energy Conservation and Oil Markets
This week on the podcast Peter and Jackie catch up on Peter’s trip to Europe. First, they talk about the political changes, both in Europe and closer to home with new Premiers in both British Columbia and Alberta.
Next, they switch to the topic of energy conservation in Europe. Did Peter see any signs that people are saving energy? Is energy affordability and conservation a focus of the conversation?
Finally, they talk about the oil markets. Prices have softened since reaching over $120/B in June and, as a result, OPEC+ announced they would cut their production in early October. President Joe Biden warned there would be consequences due to the production cut. Jackie and Peter discuss the potential actions that the United States could take.
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
Check us out on social media:
X (Twitter): @arcenergyinst
LinkedIn: @ARC Energy Research Institute
Subscribe to ARC Energy Ideas Podcast
Apple Podcasts
Google Podcasts
Amazon Music
Spotify
Episode 174 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. And welcome back. And from me it’s a welcome from Europe. Jacki, I’ve been over here for three and a half weeks. Been in Italy, I’ve been in Austria, and now I’m in Scotland. And there’s so much to talk about as it relates both to politics as to energy. So where do you want to start?
Jackie Forrest:
Oh, let’s start with politics. We talk about politics much on this podcast, but there’s been a lot of change in the last three weeks both where you are and over here as well. So maybe talk a little bit about some of the politics in the countries that you visited.
Peter Tertzakian:
Yeah, well, I can talk about the politics in Italy where I spent two weeks, and certainly that was when Giorgia Meloni was elected. And so, she’s the far-right candidate and formed a coalition. And since I left there has now formed the government and she is the prime minister. So, it’s interesting in talking to the locals and people in Italy about her. It’s quite split. Some people think she’s great and other peoples are sort of reserved or outright very concerned, especially about social type of issues in terms of things like abortion freedoms and so on.
Obviously, the far right is much more anti-abortion and those sorts of things. But the overriding theme in Europe and in the politics is the affordability question. Is there genuine affordability problem here? I know we have that in Canada as well, but here it’s acute when it comes to the price of food, the price of rent, the price of energy, especially as we know, and the fear of scarcity. And so, the status quo is not acceptable to most people, and that is why they’re seeking change. And in places where there are elections, the people are voting.
Jackie Forrest:
Yeah. Well, and where you are right now, right, the UK, there’s been a lot of flux. And this morning we’re just hearing maybe there’s going to be a new Prime Minister. Liz Truss’s time was fairly short, but the situation for her was a little bit different in that she introduced this mini budget that had really bad effects on the currency.
Peter Tertzakian:
Well, I would say that, I mean, actually the Liz Truss’ situation was not so different. I mean, Liz Truss followed on from Boris Johnson, and maybe that whole circumstance was different, but it was up to Liz Truss to deal with the inflationary situation and as I said, the energy prices, energy security, food security, et cetera. And her draconian set of measures was not well received by the financial market, it was not well received even by the public. And so, in many ways, her downfall again was a consequence of not being able to put forth solutions that were acceptable to, I’ll call it the stakeholders of the UK. And that led to her demise, very rapid demise.
And now as of this morning, I’m here and it looks like Rishi Sunak is going to be the next prime minister. And he was of course the number two after Lis Truss. So now that he has no challengers, he is set to be the prime minister and we’ll see what his solutions are going to be. But I think this, broadly speaking, what we’re seeing here is a call. It’s really a call for others who are facing elections in Western democratic countries that they have to have their finger on this inflationary issue. There’s no question that that is because this is coming from a place where these issues are acute.
Jackie Forrest:
Yeah, the energy prices are something like 10 times higher over in Europe than what we face here in North America. And even in North America, they’re much higher than they have been and they’re putting pressure on people.
Peter Tertzakian:
Right.
Jackie Forrest:
Well, over here, Peter, since you’ve been gone, we’ve had lots of change too. And it is a peculiar thing with our British democratic system that you can have the leader change because the party fires the leader, or they step down for some reason. And you can have a new person come in, and they have a whole new platform of things they want to do, but they never had a general election, very small number of people. The people within the party voted for them, but not the general populace. So that’s what we’re facing here in Western Canada. We’ve got Alberta, we had Danielle Smith becoming the premier as the UCP elected her to the role.
She’s not actually MLA yet, but she’s planning to run an election so that she will be one. We also actually had a change out in B.C. John Horgan stepped down and we have a new leader there, David Eby. So, a couple of premiers here that weren’t elected by the general population. Danielle Smith, she’s new to the job, she’s got a whole series of things she wants to do like reorganize health services, the Sovereignty Act, change the Human Rights Act. I did hear something last week about making energy more affordable through reducing taxes. But I guess my comment here is just in general, there’s this big amount of change coming, but really, we never had a platform where all the people voted for the change. Now she’s going to have that in six- or eight-months time when we do have an election in Alberta.
Peter Tertzakian:
Right.
Jackie Forrest:
But I think a lot of these changes are going to be put in potentially before that or some of them.
Peter Tertzakian:
Well, yes. I mean, all this is a peculiarity of the British parliamentary system, which originated where I am here where once you have an election that’s an election, and the party gets in. And if the party leadership changes, the party’s still in so the new leader can introduce a whole new series of bills and legislation that the people did not originally vote for. And so that’s why over here we have the Labor Party screaming and demanding for a general election as a consequence of what’s going on here. We don’t have that same thing happening in Alberta though we have a general election in Alberta coming up in May of 2023, so six months away. In B.C. as you said, there’s just a changeover.
Now whether it comes to both B.C. and Alberta I guess for Danielle Smith listening from afar and also knowing what some of her positions were before I left, I mean, again, I would reiterate that if you are the leader of a western democratic country or jurisdiction and you are not paying attention to the issue of affordability, it is not going to be well received if and when an election or when an election I should say comes around. I mean, it’s just a really big issue. And I’ll just say one more thing is, as you know Jacki, there’s so much talk about recession and still, “When is a recession?” People talking about the recession is coming in 2023. I would argue the recession is here. It’s certainly here for the middle- and lower-income classes. And those are the ones that are demanding change and solutions. And it’s, frankly, it’s very hard, but the government in place have to be putting forth credible solutions to try and deal with the issue.
Jackie Forrest:
Right. Well, and for all the problems with our British democratic system, you look over what’s going on at China right now. You got president, Xi, who just had a big conference and can just give him more powers. He unilaterally gives him power. So, our system at least does have checks and balances in that these people will eventually face a general election and the people will be able to choose. So, it’s still better than what most people in the world live with, that’s for sure.
Peter Tertzakian:
Absolutely. I mean, our system flaws that it may have is still a privilege compared to other systems in the world, which are unfortunately increasingly becoming autocratic and not giving any freedom of, say, in the future of the country.
Jackie Forrest:
Okay. Well, hey, let’s talk about your trip when it comes to energy. So, you went to Italy and a few different places now. And you also wrote something. You’ve been busy while you’ve been away. You wrote something on your energy file about conservation gets uncomfortable. So, you were talking about in Italy that they’re talking about needing to cut the consumption of energy by about 20%. And so they’re saying to people, “You need to turn down your heat by one degree C, and actually totally off for one hour each day.
Peter Tertzakian:
Yeah.
Jackie Forrest:
Do you think people are going to make these changes voluntarily?
Peter Tertzakian:
Well, since some cases it may not be voluntary, in some cases it’s imposed this. There’s different types of legislations that are being enacted in different European countries. I mean, France has put forth a 50-page plan on how to substantially reduce energy. They’re mandating that the storefront owners close their doors, which seems to make eminent sense to keep the heat in or keep the cooling in if it’s hot outside to conserve energy. There’s all sorts of things being proposed in different parts of Europe. What I will tell you is that before I came over here on the eve of when I came over here to Europe, I was expecting to check into hotels and seeing signs or being told, “Hey, we’ve got an energy crisis here. Would you mind taking a shorter shower or turning down your thermostat or whatever?” And actually, there’s none of that and none of the places that I’ve gone to. It’s just sort of business as usual.
And if you come here as a tourist, I mean, you would basically say that there’s no crisis whatsoever walking around, frankly, I mean, or checking into hotels or going to restaurants. But once you start talking to the people, that’s when it changes because whether it’s a shop owner or restaurant or hotel, they are all very acutely talking about how much it’s costing them. Some of them are talking about survivability, so on and so forth. So, these measures that are being brought in by the governments are going to make somewhat of a difference. I talked about conservation measures specifically, and I’ll come to that. But I’ll just say that as a casual tourist, you don’t really actually feel like there’s any sort of crisis in Western Europe, which I found rather peculiar, at least not until this moment. Now, part of that also is because the weather has been quite mild.
Jackie Forrest:
Right.
Peter Tertzakian:
The energy draw has not been overly consequential to this point.
Jackie Forrest:
Right. When you get into the winter and you start to see that the thermostat is set lower and people are uncomfortable, that you’ll probably see it more. Hey, do they still have those Towel Heaters running? I went to the UK; those things are a real waste.
Peter Tertzakian:
They have them in Italy, Austria, here in the UK. You walk into your room and they’re going off full blast. I actually had to turn them down here because this is too hot in a room. And so I would’ve thought that those are the sorts of subtle amenities that draw a fair amount of energy that they would say, “Okay. Sorry, we’re not putting in the Heater Towel bar because we’re in the midst of an energy crisis.”
Jackie Forrest:
Has it happened yet?
Peter Tertzakian:
It hasn’t happened yet. And I would argue that if the weather was already very cold, it might have been happening. And there is sort of this preparation. But hey, as you know, I mean there is now almost a surplus of natural gas and storage, and the LNG tankers are actually queuing up in some of the Spanish LNG import facilities.
Jackie Forrest:
Yeah. It was as of October 17th, the average level of the storage for gas in Europe is a total is 92%. And there’s some countries like Germany that’s at 96%. So yeah, there’s I guess no place for the gas to go. It needs to be burned before they would have more room to put those LNG cargos. I guess that’s good news for Asia and India, and some of these other countries that are short gas right now.
Peter Tertzakian:
Well yeah, because the price of LNG is coming down now in Europe as a consequence or combination of a warm lead into winter and a consequence of the scramble for LNG a couple months ago to ensure that those storage levels were full in anticipation of winter painted against the backdrop of the Ukraine war with Russia.
Jackie Forrest:
So, another thing that’s going on in Europe is we’re starting to see some protests like last weekend there was, I guess, protests in a number of German cities. However, it’s a range of issues and some of them seem to be more still on the climate change, wanting the government to do more around climate change as opposed to affordability.
Peter Tertzakian:
Well yeah, there is a lot of protests that are in the air here. You highlighted the German ones. The dual issues of climate change and also mitigating high oil and natural gas prices. I mean, the two are sort of, they clash those issues. In the near term if you want to bring prices of everything from energy, which then ripples through to food because food is transported using diesel trucks. And actually, want more in the very near term, more fossil fuels, oil and gas to bring down the price and therefore make things more affordable. On the other hand, we know that there’s all the way to coal, there’s a lot more coal being burned as well. So, it’s just there’s lot of inner conflict, a lot of inner tension here that leads to that sort of social, I’ll say activism, social unrest, which leads to governmental change we talked about before.
Jackie Forrest:
Yeah. And now some of them are also saying, “We want subsidies, but for the poor, not the wealthy.” Some of these subsidies going across everybody, the richer people don’t need them. So yeah, I was just looking this weekend. I mean, there’s just so many issues in these protests, it’s hard to know exactly what they’re for, but we do know the people are angry.
Peter Tertzakian:
Yeah, I think we know the people are angry. I mean, I want to come back to that point about people talking about, “Oh, there’s a recession coming.” And say there is already a recession if you’re in the middle and lower classes for sure. And so, you have a bifurcated economy when people talk about recession and measure the numbers. It’s an average across the whole economy. But there’s no question that we have a situation where the upper income people are not feeling the recession nearly as much as the middle and the lower segments of the civil society.
Jackie Forrest:
Right. If their energy prices go up, they can absorb that a lot easier. And I guess some of these subsidies are just across the board. They’re subsidizing the price of energy for everybody. Okay. Well, for sure there’s going to be a lot to watch this winter. And while you are away, Peter, we had the former energy minister from Germany join the podcast. So that was a really great opportunity to hear his perspective. And he thought that generally, assuming it’s normal weather that Europe should get through this winter okay. I think you’re hearing that sentiment probably from people over there as well. But we do think that this whole event is going to change the whole energy future of Europe regardless.
Peter Tertzakian:
Yeah. No, that was a great podcast, and I would encourage people to listen to it. I would say though that the fear of being cold in the winter, in other words, running out of gas is probably diminished substantially because of those high storage levels. But I’m willing to bet that the first really cold snap probably in late December, January, and there is going to again, elevate the price of natural gas and electricity here, and that’s not going to go down well with people.
Jackie Forrest:
Yes. Yeah. Well, and they paid a big price to fill those storage tanks.
Peter Tertzakian:
They did.
Jackie Forrest:
They paid off for that gas. And so, it didn’t come without a huge cost to the balance sheets of many of these countries.
Peter Tertzakian:
Exactly.
Jackie Forrest:
Well, maybe we should switch topics.
Peter Tertzakian:
Sure.
Jackie Forrest:
Well, there’s been a lot going on in Europe, and we’ve covered a fair amount in the podcast in the last month. There’s also been a lot going on with the world oil markets. So, we thought we could talk a little bit about what’s been going on with oil markets and maybe some of the policies that are being talked about in the US to try to reduce prices as they come up to this very important midterm election season. But just for context, the oil price had been weakening since the summer. So, we had oil prices at WTI over $120 a barrel in June, and they had fallen down to $76 a barrel in late September. So, $76 is still a fairly good price relative to the prices we’d seen five or six years ago, which were more like $50 and even lower during the covid. However, down quite a bit from that $120 peak that we saw in June, there was a surprise because a lot of people did actually think in June that prices would go higher.
In fact, I’m looking at a headline here from June by Goldman Sachs Predicts $140 Oil. And that didn’t happen. And there was a number of reasons why we didn’t get that big run up in oil prices. One is the US and Europe, mostly the US released a lot of oil from their strategic petroleum reserves. They added about 1 million barrels a day of extra supply to the market over April till October. So that helped dampen the situation. The other issue is Russia Crude Production remained quite high in July. There was just only about 325,000 barrels a day below their pre-conflict levels. So this idea that we were going to lose all the Russian supply didn’t happen this summer at least. And then of course, demand was less than expected. Part of that was because of the high prices, people use less, but also the economies are slowing, as you said. We’re already starting to see that, and that slowed down.
Now, demand is still growing, and people expect maybe a 2 million barrel a day growth this year over last year on average. However, going into the year, people were thinking it would almost be two times that because of that covid rebound. So, demand hasn’t been quite as strong as what people thought. Okay. So that brings us to today in early October when OPEC announced a big cut, 2 million barrels a day because the price had slid, we didn’t get the strong prices, and they obviously want prices higher. Now their official cut of 2 million barrels a day, it’s actually probably going to be closer to 1 million because not very many countries are actually producing at their quota. But regardless, it comes at a time when the US was hoping to have prices be more modern, and they’ve been using a lot of real capital to release oil from their strategic oil reserves to make that happen.
Peter Tertzakian:
Yeah. Well, I think if you wind the clock back, I’m going to get back to the comment you made about the $140 a barrel, and some investment houses were arguing that prices were going to go much higher. If we wind the clock back even two, three months, the expectation of recession was not nearly as acute as it is today, and the expectation that interest rates wouldn’t rise as fast as they have was there. And so really the rising interest rates to slow and cool down the economy, especially in the western parts of the world, has led to diminished expectations of oil consumption, which has softened the prices quite a bit.
Now, as you say, there’s still a fairly robust expectations out there, but it’s sort of like, “Well, we’ll wait and see because. We don’t really know what’s going to happen to the economy in 2023. I think that’s sort the part of the reason why we’re seeing lower prices. And the Chinese numbers came out from their economy, and although they were relatively, I think it was 3.9% growth, it was still the expectations of China’s growth going forward. It was still highly uncertain given their real estate crisis and a whole bunch of other things going on. So where does that leave us, Jacki? I mean, I think that what are we this morning?
Jackie Forrest:
It’s about $85 WTI right now. But let’s talk about the US because they could change things on us here because they weren’t happy with this US President Joe Biden said there would be consequences for Saudi Arabia by making this change. And they don’t want higher oil prices. They’re sensitive, especially in November because of these elections.
Peter Tertzakian:
It’s no surprise, I mean, given the lukewarm relationship between Joe Biden and Saudi Arabia, which goes back a long way that these Saudis and others are not overly sympathetic to what goes on in the United States right now. So, their interest is in keeping prices high, and so we shouldn’t be surprised by the 2 million barrel a day cut, right?
Jackie Forrest:
Yeah, I guess so. Although the US could take some actions here. I mean, there’s a number of things they could do, and a lot of people are concerned that about some of them.
Peter Tertzakian:
Okay.
Jacki Forrest:
Let’s talk about some of the actions they could take and maybe what impact that would have on the oil markets.
Peter Tertzakian:
Okay.
Jackie Forrest:
The first one is been talked about is a partial ban on exports of US refined products. So, this one is a really bad idea for many respects. Basically, the US exports something like 5 million barrels a day of refined products. Now the idea is maybe they would only do the finished petroleum products like diesel and gasoline, but that would still be well over two and a half million barrels a day of refined products. And these products, where do they go? Actually, they go to Canada, Mexico. A bunch of them go to Central and South America and smaller amounts to Europe and Asia. But I think the biggest impact is probably going to be on Mexico and central and South America. Imagine these countries that haven’t built their own refining infrastructure because they’ve been dependent on the US. If they were cut off at a time like this, that would be just terrible. And there isn’t additional refining capacity in the world that they could use. I mean, there’s a shortage or refining capacity if you were to take that much out.
Peter Tertzakian:
Sure.
Jackie Forrest:
So, these countries would be really scrambling and probably have fuel shortages at the worst possible time.
Peter Tertzakian:
It’s not a good situation, and I’m not behind the closed doors in the American political system to know what’s going on, but I’m not convinced that behind those closed doors there are people discriminating about where the oil and refined products go. I mean, I think it’s sort of there is the potential, if they took this route for it to be just a broad-based ban on exports, which would be hugely problematic for Central Canada.
Jackie Forrest:
Yeah. Well, and a lot of their allies in Central America and South America. Think about it, what would happen from something like this? Just one scenario, these countries would say, “Well, we can’t depend on refineries in US anymore. We need to build our own refineries, but we have no money.” So, then they could go to China and China can say, “We’ll build you guys refineries, but then we’re going to have a lot more influence in your countries.” I just think it’s pretty shortsighted to think that this wouldn’t kind of hurt you in a lot of ways over time.
Peter Tertzakian:
Yeah. But to be honest with you, I mean, I don’t think they would take this kind of action unless the price of oil goes over a hundred bucks or more. I mean, we’re at 80, 85, it’s probably insufficient to trigger something. What do you think the trigger point is when all of a sudden people start thinking about this option on the other ones that you’re we’re going to talk about here?
Jackie Forrest:
Well, that’s a good point. I mean, prices are much more moderate than they were in June at 120. Gasoline prices are often… And this is a big move that would have a lot of ripple effects. By the way, it would also have ripple effects for producers in North America. So, if you were to do this, all of a sudden, the refiners would probably turn down how much crude oil they consume because they can’t export it anymore. And so, we’d have a little bit what happened during covid for the inland producers in North America. If those refineries turn down, then there’s no place to sell your crude. It’s not like they can get their crude to Tidewater.
And so, you could actually see North American production start to crank down at a time when we need more supply in the world. So yeah, I think even if prices are high, because of all the negative consequences, it’s unlikely, but especially at the types of prices we’re seeing now, which have moderated quite a bit. Okay. Another idea is this NOPEC legislation. Now this keeps coming up. It’s been talked about for probably over 10 years now, but it was basically having the ability to open up OPEC members to lawsuits for setting prices. And idea is if you did this, maybe they’d stop having OPEC meetings and stop controlling the price of oil. And I think this one’s kind of unlikely as well.
Peter Tertzakian:
Well, every time OPEC takes this kind of action over the last several decades, of course there’s these threats of lawsuits and so on. I personally think it’s all nonsensical and inconsequential at the end of the day. So even if it happens, it just gets caught up in some international legal system, which would take forever to resolve
Jackie Forrest:
Yeah, yeah. And maybe they would continue to set prices anyway in the meantime.
Peter Tertzakian:
Yeah.
Jackie Forrest:
Another option, which I think is probably pretty likely is more releases from the SPR. In fact, last week the US announced that they were going to continue to draw, right, through to December smaller draws in the 10 to 15 million range that would get them to the 180 million that they said they were going to draw because it had been a little bit slower than they had planned when they initially announced these in April that they were going to do all these big draws. They actually still have some room. By my math, if they need to keep 90 days of net imports, they probably could draw another a hundred million before they would hit that requirement. The IEA requires countries to have that much on hand. So, it is possible they could continue to draw, and I think that’s probably the most likely path of least resistance sort of way of dealing with the prices in the near term.
Peter Tertzakian:
I mean, the only negative side of all this is the more you draw an SPR, the more the market looks over their shoulder and looks at it and say, “The next time there’s any sort of a crisis or tightening of supply, it looks like we have much less of a buffer.” So that makes the price of oil much more volatile and skewed to the upside.
Jackie Forrest:
Yeah, it helps you for the short term, but long term it’s probably not that helpful. Another thing that could happen is easing sanctions on countries that could produce more so Venezuela and Iran are the two top candidates in that one Iran, I personally see as less likely now. The EU, I’m sure you saw this, they just put sanctions on them for helping Russia with the military support in the war and some of the drones that they’ve been supplying. And also, there’s a ton of protests going on in the country about the death of a 22-year-old woman who died in police custody. So, I know it was talked about quite a bit this year that there could be a deal with Iran. It just seems a lot less likely now.
Peter Tertzakian:
And I just don’t see how this solution is even politically palatable to ease sanctions on countries that are being vilified for at least a decade if not two. I don’t see it happening. And let’s just take Venezuela, even if the sanctions are eased, I mean they have an exodus of people leaving the country, which western multinational is going to go in there and spend money in under these circumstances, and actually increase the production to increase exports. I just don’t see if this is viable either.
Jackie Forrest:
Yeah. And how much production do they really have to add if they don’t get new capital in there? Well, there’s also the option to do nothing, which I think is probably a pretty reasonable option because as you say, the global economy is slowing and if there is a recession, the demand may even be lower than people think. And actually, prices may pretty moderate anyway and that’s an option as well.
Peter Tertzakian:
Well, I think the do nothing is the most likely out of all this list of things you’re suggesting, the do-nothing option. But that comes with a qualifier. The do nothing is as long as the price of oil, I’m throw a number out and say a hundred or a hundred and ten dollars. Once it gets above that, then I think the pain at the pump really starts up again. Inflation starts kicking in again as a consequence. And then of course all the other potential options start to come into play.
Jackie Forrest:
Yeah. Yeah. Now there is another option, the obvious option, Peter.
Peter Tertzakian:
Yeah, the obvious option, instead of calling around in Venezuela, why don’t we just produce more in North America?
Jackie Forrest:
Yeah. It seems like obvious. We could put in some sort of incentives. I mean, we know that the US shale producers can increase production very quickly because of that technology. I know there’s limits.
Peter Tertzakian:
Oh sure.
Jackie Forrest:
And constraints and things like that, but could you create incentives to try to get production to go up?
Peter Tertzakian:
I mean, if you want North America to offset the OPEC cuts, you could probably do it in a year, right?
Jackie Forrest:
Right. This less recent set of cuts.
Peter Tertzakian:
And the oil that would be produced, we would have much more environmental scrutiny and the economy stays within North America. I mean, to me, if the goal is to bring down the price of oil and gas domestically, that seems to me to be the obvious solution. But of course, that’s not the palatable solution given the clash with the climate change imperative.
Jackie Forrest:
Yeah. Well, with that, I will just say the oil markets, there’s both bearish and bullish factors here that could play out over the next year. And it’s really hard to know what direction things are going to go because political interventions are pretty hard to predict. We can predict things like how many drilling rigs will come on, but I will say we just need to watch this especially over the next few months as we talked about on our podcast with the FT reporters, David Shepherd and Derek Brower, that we’ve got this December 5th where the crude oil is going to not be able to be loaded on tankers if it’s coming from Russia-
Peter Tertzakian:
Right.
Jackie Forrest:
If it’s going into western insured tankers. And then you’ve got another refined product ban. And this really could result in a big hole in the oil markets. And I know the US is working hard to have this system that if the oil is sold at a certain price, that it will be able to go in those tankers. But it’s really uncertain that that’s going to happen and that we’re going to not see this big hole in the oil market. So, when that happens, you may be back to your price level that you talked about where people have to do something when some of those other options, we talked about might be looked at again.
Peter Tertzakian:
I don’t think anyone should take any comfort in the softening oil and gas prices over the course of the last month, we’ll call it, because the fundamental underlying issues have not gone away. In fact, there’s a good argument to be made that the underlying fundamentals are actually deteriorating. And the only reason that we have softening prices is because of this recession and economic malaise that is now really taking root in the world. And economic malaise is hardly as good solution for thinking that we’ve solved our energy security problems.
Jackie Forrest:
Yes. Yeah. Recessions always end and demand always has a rebound. And at that point, generally the market is going to go back to being tight, if not even tighter because recessions aren’t really great motivators to cause people to invest in new supply. And I have to say, all these political interventions really are not incentives for people to invest either because it’s much harder to predict the market when all of these changes could happen that you just can’t predict.
Peter Tertzakian:
Yeah, yeah. No, absolutely. Well, great discussion and I look forward to coming home and getting back into the studio with you. But for now, I’ll sign off from here seven time zones away, and look forward to our next podcast.
Jackie Forrest:
Yes, and thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Announcer:
For more ideas and insights, visit arcenergyinstitute.com.
