Some in the oil industry fear that oil prices will return to the $ 100 mark again, with President Joe Biden’s anti-fossil stance and aggressive Green agenda threatening oil and gas supplies in the future. predictable.
President Biden’s energy agenda has been confusing, but it didn’t start that way. Early in his tenure, President Biden was quick to quash the Keystone XL pipeline. It suspended the leasing of oil and gas on federal lands and sent a clear signal to the oil and gas industry: your days are numbered.
Now these policies could push oil prices back up to $ 100 as oil production in the United States is still nearly 2 million bpd behind pre-pandemic levels as demand continues. to climb.
It’s not that oil production in the United States is stagnating. Barely. But the slow recovery, hampered in part by Hurricane Ida, could tip the market into a shortage rather than a surplus.
Demand already exceeds American production. In 2021, the United States Crude Oil Inventories lost nearly 70 million barrels.
It would be one thing if American policy were favorable to oil and gas. As oil prices rise, oil and gas investment will flow in and the market will do what the market does: regulate itself. But oil investors and banks, even the big oil companies, are desperately trying to tiptoe through the new environment. Shareholders are now littered with militant shareholders demanding more responsibility with regard to the environment. Banks are eager to flaunt their green prowess by avoiding new oil and gas projects. Oil and gas companies fear investing too much money in new drills too quickly in an environment that may or may not be hospitable to them in the future.
Now, the lack of investment and the slow return of US oil production could push up oil prices.
This does not mean that everyone agrees with this call for $ 100 worth of oil. Some argue that OPEC + is taking the pulse of the oil industry so that oil doesn’t have a chance to go this high. Others, however, question how much spare capacity OPEC + has to meet additional demand surges.
The US Energy Information Administration predicts that OPEC + spare capacity will reach 5.11 million bpd in the fourth quarter of next year.
Goldman believes that $ 100 worth of oil by 2023 should not be ruled out, as supply additions are expected to be just too slow to meet demand, precisely the scenario we saw in 2021. The baseline forecast for Goldman is still $ 85 Brent in 2022 and 2023. But that doesn’t rule out the possibility of $ 100 oil, made possible by higher cost inflation for drillers or a significant lack of supply.
Saudi Arabia has warned that this underinvestment could be dangerous.
No matter where the exact call for oil prices lands, a common theme exists in most oil forecasts today: there is simply not enough supply while demand is robust. And oil prices will have to rise further if large investments are to be made as supply can keep up with demand. How high ? Well, that will depend on the policies in place to support the industry – and those policies today don’t sound sympathetic.
By Julianne Geiger For OilUSD
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