The United Arab Emirates’ announcement on Tuesday that it will leave OPEC and OPEC+ effective May 1st sent shockwaves through the energy world. As the cartel’s third-largest oil producer, with a production capacity approaching five million barrels per day and ambitions to push higher, the UAE was no peripheral player. Abu Dhabi joined OPEC back in 1967 — before the UAE federation existed in its modern form — and the unified UAE carried that legacy for nearly six decades.
The exit decision was framed by Emirati officials as a “policy-driven evolution” in pursuit of “long-term strategic and economic vision”. Within hours, a familiar trope emerged among media commentators: the UAE, fearing the inexorable global march towards Net Zero, is racing to avoid 'stranded assets'. Oil will be left in the ground, you see, because electric vehicles in China and Europe’s Green Deal will soon render the black stuff obsolete.
Watch out for stranded assets!
The stranded assets narrative is the climate alarmists’ weapon of choice. In behavioural economics, the tenet of loss aversion suggests that the fear of a tangible loss is far more effective than hope for putative gains in shaping actions. For over two decades, climate activists and financial pundits have argued that fossil fuels — coal mines, oil and gas fields, pipelines, refineries — would soon suffer the fate of the buggy whip on the eve of the automobile age. The energy transition, they insisted, would 'strand' trillions of dollars in hydrocarbon assets as the world turns away
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…”the OECD asserted that “vast quantities of resource reserves will need to remain underground in order to stabilise the climate””
The shear ignorance and hubris is so frustrating.
Tilak’s analyses are invariably informative. However, his analysis of US shale oil and gas is incorrect. By COVID, they’d run up $300 billion cumulative negative cash-flow. That was only erased by COVID money printing and by cutting all replacement investment – with the result that they are on the brink of collapse. When that happens, the oil price will spike, the US will end LNG export and OPEC would have made money hand over fist. Except that this is the 2008 Great Financial Crash scenario with all those levers already pulled.
What will this do to oil prices once current constraints are relieved? Will Saudi Arabia’s new role as the sole swing producer be sustainable? If not, we could see oil prices falling significantly and long term.
This will put another nail in the coffin of the renewables cult – they are already a poor substitute both on price and on quality. Outside western governments still willing to bankrupt their taxpayers with forced net zero, developing countries should benefit from cheaper fuel. In turn this will require more bribes from the 1st world to get them to give it up….that’s what I call a virtuous cycle!
My Next energy Solar shares have lost money but my Shell and Gulf Keystone are performing well. I guess government solar subsidies are not enough to make solar anywhere near profitable. Won’t be buying any more (so called) green energy company shares it’s money diwn the drain
Realisation that OPEC no longer has the same geopolitical and economic power it once had, particularly now that the US is net oil & gas self-sufficient, and that other non-aligned Countries have huge oil reserves.
Plus His Excellency Donald of Orange, has more or less struck the coup de grâce for the Climageddonistas, and fossil fuel demand grows and more and more investment flows in.
Even if you eliminated all the energy related uses of oil you’re left with a significant amount used in manufacturing other products. The idea that it will suddenly not be needed is absurd.
And if you strip out the energy related uses what happens to the cost and/or viability of the other uses?
Good question. I guess the price of oil would drop but then it would make good made using oil cheaper and they may then experience increased sales or new uses may be found that have not so far been economically viable.
The other things are by-products of motor fuels refining. The same amount of oil would be needed therefore to produce the same amount of other things, except the motor fuel fractions would be discarded making no contribution to expenses and profits, and with the added expense of their safe disposal.
The cost of oil and gas based products would be astronomical.
Ah I didn’t know that
Seems like using oil derived fuels to power vehicles, ships,aircraft and other things is a really smart move all round
And what do you do with the fractions – petroleum spirits, diesel, kerosene, etc – that will be produced but not sold? Bury them? Burn them?
It would depend on the exact nature of the product being extracted. They are not all the same. Some might be worthwhile using as a fuel, but expensive or useless as a source for some other products. Refineries tend to be optimised for certain types of crude oil, e.g. Anyway, if the market has to change, there will be some financial disruption, even if something is chemically feasible.
Good points