There have been dramatic changes in the U.S. energy system under our current president – a big drop in the use of coal, a boom in domestic oil and gas development from fracking, and the rapid spread of renewable energy.
However, in terms of influencing energy technology deployment, the next president will have a lot less influence than you might expect.
Five years after the 11 March 2011 Fukushima accident, which put Japan’s nuclear power industry under intense scrutiny, official policy is still a shambles. In June 2011, the then prime minister Naoto Kan announced that Japan was phasing out nuclear power in the long run only to backtrack a few days later. Current Prime Minster Shinzo Abe announced a restart of all reactors within three years in his 2013 New Year’s Address.
The US-led petrodollar era is being surpassed by a multipolar oil age in the Middle East. The transition is permeated by fundamental change and financial speculation that is penalizing the roles of the US and China in the region.
What if I told you that there was a period in history where oil demand declined by 5 million barrels per day and non-OPEC supply increased by 5 million barrels per day, yet oil price rallied more than 50 percent? Would you believe me? If your answer is yes, then you guessed right. This was the period from 1979 to 1985.
Seeing greater challenges for the energy sector, investment banks are starting to cut off credit to oil producers.
JPMorgan, a U.S.-based investment bank, announced it would limit credit availability to energy firms by cutting their credit lines by about 15% to 20%, on average. JP Morgan commercial bank head, Doug Petno, said at an investor conference that some energy firms might see even less access to cash in the coming months. “Some [credit lines] may go down by 50 percent,” he said.
This is a financial cold war—nothing more, nothing less.
While there are billions of reasons to cut output, and every major producing country is reeling from the loss of revenues, some are weathering the current bust better than others are, but the devil is in the details, and the details contain tons of variables.
Production cost and breakeven figures that analysts enjoy bandying can trap you in bubble of black-and-white mathematics that is a few brush-strokes shy of a full picture.
The continued fall in oil prices is being felt in several parts of the global economy, with many negative results causing financial turmoil.
Rising Default Rates
The oil price is struggling to stay above $30/barrel, little more than a quarter of the price 18 months ago. Recent forecasts for the UK industry have become much gloomier as a result. As recently as three months ago, industry association Oil & Gas UK predicted 79 platforms would close by 2024. Several major consultancies have since suggested that it might be more like twice that. So how pessimistic is it reasonable to be?
The price of crude oil resumed its slide this week, falling below US$29 a barrel and approaching the 12-year low reached last month.
The International Energy Agency is warning oil’s fall has further to go. So what factors suggest the price of oil will continue to drop? In addition, what will be the economic and geopolitical fallout? The answers to these two questions go hand in hand, as we shall see.
First, let us recap what is behind the plunge in the first place.
Supply and demand
The newly elected Taiwanese government led by President Tsai Ing-wen and the Democratic Progressive Party (DPP) will be faced with significant challenges in energy policy. Most urgently, viable replacements for Taiwan’s ageing fleet of nuclear reactors must be found.
