"For oil producers, the flip side of today's high prices and profits is concerns about "demand destruction" as buyers find ways to cut their needs. They are right to worry: The hit this time could go faster and further than the one that followed the 1970s shocks.
Historically, when oil costs have exceeded 4% of gross domestic product globally, users have looked for substitutes.
We are near that number now: At $100 a barrel, 2022 oil expenditure would be about 4.3% of 2020 global GDP. The International Energy Agency (IEA) sees lower consumption ahead. Last week, it cut its oil demand forecast by 1.3 million barrels a day -- about 1% of the 2021 average -- for the rest of the year.
The process might already have started, given the ready availability of alternatives to oil. Cars and trucks can be replaced with more fuel-efficient or fully electric models. Energy use can be cut with LED lights, smart heating and cooling systems, insulation and better windows. Solar panels paired with a battery can provide power.
Most substitutes these days are cost-competitive, so higher energy prices only accelerate their payback. Switching can also reduce carbon emissions and increase energy security -- both government priorities. The IEA has outlined how lowering speed limits, remote working and new technology like electric scooters and vehicles could cut oil demand by 2.7 million barrels a day within four months.
Once people have switched to technologies that cut consumption, the effects can be lasting. U.S. oil demand fell for years after the 1979 crisis. One big factor was gasoline: Fuel efficiency standards had been enacted and many downsized when they replaced their cars.
Likewise, sales of sport-utility vehicles fell and renewable investments rose after the 2008 oil-price spike, though the global financial crisis complicates the picture. Oil consumption peaked in 2007 in the U.S., Europe and Japan, but growth elsewhere, particularly Asia, meant global oil consumption increased.
The other driver of demand destruction is lower economic growth, though unlike investment in energy-efficient technologies this wouldn't be permanent.
History tells us that this latest crisis -- caused by fears of an oil shortage as Russia is sanctioned by the West -- will drive cost inflation that slows oil-importing economies.
Last year, much of the consumer pain from higher prices was cushioned by the growth of reopening businesses and stimulus cash. Both are pretty much over now.
Producers with spare capacity, such as Saudi Arabia and the United Arab Emirates, could cut the risk of a long-term hit to oil demand by opening their taps. Riyadh seems hesitant to jeopardize its relations with Moscow by stabilizing the market, though. Over the weekend, state oil giant Saudi Aramco increased its capital spending plans to between $40 billion and $50 billion this year, up from $32 billion last year, but that won't bring more crude to market now.
While new U.S. shale wells could deliver more oil eventually, capital discipline and labor shortages are holding publicly listed producers back.
Despite recent requests for more drilling, most governments' efforts to halt climate change mean the long-term direction of travel will likely remain toward lower oil consumption, even if crude prices return to more historically normal levels. Even fast-growing Asian economies plan to decarbonize by deploying energy-efficiency technologies and renewable power.
New wells will take months or years to come online and risk delivering extra supply just as demand destruction starts adding up. For independent oil companies, big new investments now could be a costly mistake." [1]
Lithuania is now a small tail raised on the body of a large pig (Germany). As Germany has to import a lot of more expensive fossil fuels, the German economy and the Lithuanian tail that has sprouted on it are suffering. We have to suffer even more. Nothing to do. Thanks to our suffering, the world is moving away from fossil fuels earlier, and switching to solar and wind energy.
1. Oil Producers Aren't Crazy to Worry About High Prices
Toplensky, Rochelle.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 22 Mar 2022: B.11.
Komentarų nėra:
Rašyti komentarą