Energy

Energy Focus

Energy Focus

The future of European natural gas pipelines

Europe’s natural gas pipeline network is already extensive, and we think that it is going to get bigger in the coming decades. Existing pipelines in Turkey are set to be expanded and new pipelines from Africa and the East Mediterranean Sea will probably be built. While these will bring some political benefits, such as reducing Russia’s influence over Eastern Europe, they should also intensify competition which would weigh on the European prices of both coal and natural gas.

22 February 2021

Energy Focus

What a Biden victory could mean for commodities

A victory for the Democratic party in November’s presidential election has several potential implications for commodity markets. Very broadly, Joe Biden’s pledge to actively promote decarbonisation of the economy should accelerate the move away from coal, boost natural gas demand in the near term and be positive for agriculturals used to make biofuels. In the longer term, it has negative implications for the supply, demand and prices of all fossil fuels and biofuels. Elsewhere, if Biden’s infrastructure spending plans are realised, there would probably be a marked increase in US consumption of industrial metals.

30 October 2020

Energy Focus

COVID-19 to hasten peak oil demand

In this Focus, we argue that the medium-term impact of the COVID-19 pandemic on both global economic growth and consumer behaviour has brought forward “peak oil demand” to around 2030. As a result, we expect that real oil prices will be falling for much of the next decade and beyond.

8 October 2020
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Energy Focus

Towards liberalisation in the global LNG market

In our view, the scale of energy demand destruction caused by the coronavirus pandemic has made the liberalisation of the global LNG market start to look inevitable. While pressure has been mounting on suppliers to offer more flexibility for some time, we think that this year may prove to be a turning point. As the market liberalises, it should improve the fungibility of the global natural gas market. Ultimately, we expect the stark regional price fragmentation in the market to lessen.

21 August 2020

Energy Focus

Lasting blow to supply capacity is not inevitable

It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to revert to the path of output they were on before the crisis. Nonetheless, with demand likely to be slow to recover fully, this could still take several years. And there will be several important exceptions to this generally optimistic picture.

Energy Focus

Our new oil demand proxy points to higher prices

Our new oil demand proxy provides a timely indication of the health of global oil demand, and lends insight into whether it is demand, or other factors, that is driving prices at any given time. We find that expectations for future oil demand and supply often matter more for the oil price than the market’s current fundamentals, and that prices can diverge from fundamentals significantly. This seems to be the case at present, which is one factor underpinning our forecast for oil prices to rise in the coming year.

Energy Focus

Measuring the risk premium in the oil price

The September attacks on oil facilities in Saudi Arabia re-ignited discussion of the “risk premium” in the oil price. Since the risk premium is not directly observable, we have created a methodology to estimate it indirectly. Our model found that, based on supply and demand fundamentals, oil prices should actually be higher than they are now. We think that fears of a severe economic downturn have created a risk discount in the price, but that this should shrink in 2020 as the global economy avoids recession.

Energy Focus

Assessing the potential impact of a US-Iran war

War with the US would cause a collapse in Iran’s economy that would directly knock around 0.3%-pts off global GDP – equal to the damage from the US-China trade war so far. More important to the rest of the world, though, would be the resulting surge in oil prices and increased uncertainty, which would add to the headwinds already facing the global economy.

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