Oil Surpluses and Conspiracies
Back in 2005, I wrote a book with Peter C. Fusaro called Energy & Environmental Hedge Funds – The New Investment Paradigm. Within the book, we did a bit on peak oil. I felt compelled to write it for I am after all a Petroleum Geologist by training and, at the time, there was some chap in the US telling the world that Saudi was lying about its oil reserves. He sold millions of books pushing this obviously incorrect theory. My thesis – and I’m sticking with it – was that oil reserves are driven by two things – the price of oil and human ingenuity. Of course, to a left-wing Professor of woke at a London University College, this was like throwing gasoline on the fire. He wrote a damning review about how I represented an old fashioned mindset and didn’t get it. Well, guess who got the last laugh?
I’m sticking with my thesis.
What many do not seem to understand is that in many old fields, recovery rates were extremely low. Sometimes less than a third of the oil was actually recovered. Not only that, but geologists continually dream up new plays. So, if the appetite is there – fuelled by money (oil price) then there are many sources for new oil reserves. Money and desire drive innovation – whether than be in recovery techniques or new ways to explore for or produce oil.
So, if was the Iranian Government, I might be a tad concerned about the news from the IEA, which announced that an oil surplus is building and quickly moved to reassure markets that the “agency stood ready to act if needed to cover any supply disruption from Iran.” I don’t know why (I do), but statements like that make me nervous. I have seen them used before to help ease the appetite for wars and attacks. However, the news is that we have a growing surplus of oil and reserves aren’t looking too bad either. Which is a good thing, because despite net zero, this is an oil-based civilisation we live in and just about everyone you take for granted originates in oil and will do for decades to come.
It’s also intriguing to me that where we see a significant amount of CTRM sales activity this last couple of years and into the future is also in oil and petrochemicals. As we have discussed here before, the Russia-Ukraine war and Russian sanctions has fuelled a boom in new entities trading crude in places like Dubai and Singapore. Suddenly, vendors are opening offices tin Dubai and many new deals have been done. It’s a mini boom time for oil and liquids ETRM sales. However, with a surplus likely and potentially falling crude prices, this may start to fade a bit in a year or so. Unless of course, a substantial amount of oil was removed from the market….
I love conspiracy.
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