It used to be that a geopolitical crisis would spike energy prices – primarily crude oil – merely by showing up.
With major events unfolding in the Persian Gulf, 2016 is starting out as a dangerous year.
The coming year promises to have energy markets move further into renewable energies.
But in the short term, contrasting results from this transition are emerging from both sides of the Irish Sea.
Over 2015, a persistent surplus in oil production has offset significant cuts in forward capital commitments and a decrease in drilling – the number of drills in the field is now less than one-third of what it was when the slide began last year.
In the UAE’s oil capital of Abu Dhabi, OPEC and Russia have been negotiating a coordinated cutting of oil production, which would lead to a movement up in global crude prices. Any anticipation about these meetings was effectively negated over the past few days by three unexpected factors.
Oil didn’t spike after last Friday’s massacres in Paris because the chief driver of oil prices has changed.
Accelerating changes in the oil industry are leading to two major emerging trends.
Another Saudi official is trying to downplay the kingdom’s expanding deficit – as their problems get worse..
The House of Representatives just voted to approve a budget deal to raise the U.S. debt ceiling.
And buried in this last-minute accord designed to save us from another government shutdown is a provision to sell oil from the Strategic Petroleum Reserve (SPR).
What is transpiring in geopolitics prompts me to recall the depths of the Cold War.
Back then, the two superpowers – the United States and Russia – contested for leverage wherever they could.