The great commitment to green energy in developed countries and the obstacles to oil production are putting this industry on the ropes in the US, Europe or Canada. Now that the world economy is recovering and demand for oil is growing sharply again, big oil companies are fearful about starting their investment cycle to produce more crude and meet demand. OPEC and its allies see their opportunity to regain market share and re-control the price of oil, even for a short period of time.
Some investors are betting that the large commitment of investors and companies to green energy will depress spending on oil extraction, which could generate a scenario of supply shortages and strong price rises in the short and medium term. In the long term it seems clear that these clean energies will end up replacing crude, but the great bet of Western governments for these energies occurs when oil continues to be vital for the economy and mobility.
These bets come just as large investments in Europe, the US and Canada are focused on wind, solar and other renewable programs, while spending on oil projects plummets.
The decline in spending on investment in fossil fuels is being so severe that energy companies could find it difficult to quench the world’s thirst for oil, say some analysts, say from The Wall Street Journal .
Crude is still expected to remain in high demand over the next decade to make transportation fuels and petrochemicals used for plastics and other household products. US consumption has risen in recent months after the worst of the coronavirus pandemic, and production cuts by the Organization of the Petroleum Exporting Countries (OPEC) have given prices a new boost.
Brent rises strongly
The price of a barrel of Brent oil, which is used as a reference in Europe, has exceeded 73 dollars this Monday , a figure that it had not registered since April 2019, thus maintaining the upward trend that has been registered since last year.
Specifically, Brent has registered an increase of 0.61% this Monday, reaching 73.13 dollars per barrel, the highest price observed since April 25, 2019. So far this year, the barrel of Crude oil has appreciated 41.2%.
The economic recovery is underway and the demand for fuels in full upward trend. Families take the car again to go to work and start catching airplanes to travel. All this happens while supply is somewhat restricted by OPEC production cuts, which will gradually fade away, so oil is expected to remain between $ 65 and $ 75 in the coming months.
West Texas goes up too
This same trend has also been observed in the price registered by the West Texas Intermediate (WTI), which this Monday has advanced by 0.54%, to 71.28 dollars per unit. In this way, the reference barrel for the United States has recovered price levels not seen since October 16, 2018, after having registered negative prices in April 2020 for the first time in its history.
Last Friday, the International Energy Agency (IEA) assured that global oil consumption will exceed the level prior to the covid-19 pandemic by the end of 2022 , although it warned that the recovery will be uneven not only between regions, but also also between sectors and products.
Leigh Goehring, managing partner at commodity-focused investment firm Goehring & Rozencwajg Associates, says prices will skyrocket in the coming years as consumption outstrips production capacity over a sustained period for the first time in a long time. “This is the basis of the next oil crisis,” he says. “We are in uncharted territory.”