Energy markets to foresee ‘series of crunches’ with growing demand, says Oil Expert Daniel Yergin

Energy markets to foresee ‘series of crunches’ with growing demand, says Oil Expert Daniel Yergin

Summary:

  • According to Daniel Yergin of IHS Markit, there is a gap between the “realities of the dynamics of the [oil] market” and the policies that are being implemented
  • International oil companies are under pressure to cut investments in traditional energy production at a time when demand for oil is rising, resulting in “preemptive underinvestment” in supply, according to Yergin
  • Finding a new balance between the US and China is “the single most important issue in international affairs today,” according to Yergin

Concern for Supply in Future

According to Daniel Yergin, vice chairman of IHS Markit, there is a gap in the energy market, which could lead to future supply shortages.

At a time when oil demand is rising, international oil firms are being pressured to reduce investments in traditional energy production. Yergin told reporters at the Abu Dhabi International Petroleum Exhibition and Conference that this is contributing to “preemptive underinvestment” in supplies.

It’s a gap, he says, between the “realities of market dynamics” and the policies that are being implemented.

He noted that oil producers are “obviously not investing enough” because investors expect them to be more cautious and disciplined with their money.

“World demand will be back where it was in 2019 in the next few months,” he said, “and… demand will continue to grow, so you will require investment.”

OPEC said in its monthly oil market report that global oil consumption will reach 100.6 million barrels per day in 2022, up 0.5 million barrels per day from pre-pandemic levels. According to Yergin, the concentration on moving away from traditional fuels and toward clean energy may contribute to a supply crisis.

Demand has risen due to economies reopening and relaxing pandemic restrictions, with U.S. crude futures up 68 percent and international benchmark Brent crude up 60 percent so far this year.

U.S. and China Relations

Separately, Yergin stated that restoring a new balance between the United States and China is the most pressing issue at hand, even more so than climate change.

The rest of the world does not want to pick between the two superpowers, but he stressed that the competition would continue.

China views the formation of alliances such as the Quad and the Aukus as an attempt by the West to restrict it, while the US wants to deal with Chinese “expansionism and growth,” he said.

The Quad is an economic alliance made up of Australia, India, Japan, and the United States. Aukus, on the other hand, is a recent security agreement between Australia, the United Kingdom, and the United States. Both pacts are widely seen as a response to China’s growing might in the Asia-Pacific region.

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