Oil, oil everywhere – prices are down again today as inventories rise. The black blood which runs through the veins of the world’s economies has dominated the news every day for the 20 plus years I have been in energy. It is either too low, too high, running out or in endless supply, and with each forecast and projection, the price responds.
I have seen staggering lows of under $10 a barrel and highs of over $135 a barrel and with each fluctuation, always driven (regardless of conflict or political crisis) by supply, demand, or the expectation of this changing.
As with any traded commodity, it is the number of sellers selling, and the willingness for buyers to buy, which sets the price. At the moment, this is very much a buyers’ market as oil continues to be pumped into a sluggish global economy. As a price setter for natural gas, it has had a significant impact there too, with prices now at historic lows, which is good news if you’re in energy procurement.
So the question is, for how long do you think it will continue? Do you care? It’s true that for some, so long as they can quickly pass on cost directly to their customers, they are ambivalent about whether energy is at the top or bottom of the price curve.
For others, energy is so essential to their operations, that price control is the difference between being in business or the soup kitchen. Airlines, auto manufacturers, plastics companies, refineries, chemical companies, (and the list goes on) need time to pass price changes on to their customers.
What we know for sure is there is not an endless supply. Low prices do not stimulate upstream investment, and with the global population growing fast (its more than doubled since I was born), it won’t be long before we are back to high energy prices again. By the way, if you want to see something exciting that kind of blows your mind a little, check out the world population growth clock.
This week, IEA Executive Director Fatih Birol, said: “It is easy for consumers to be lulled into complacency by ample stocks and low prices today. But, they should heed the writing on the wall: the historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises in the not-too-distant future.”
He’s not wrong. I have seen it more than once before in the last ten years alone. To help consumers, we developed price risk management solutions to help avoid price shocks dynamically using innovative energy supply agreements – that’s right the sort you have now but with our magic ingredients. That’s good news, as you are not held in a fixed price straight jacket, free to make purchasing decisions that fit your business regardless if there is oil everywhere – or not!
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