Energy Chaos on an Unprecedented Scale

Don’t poke the bear. 

Just stop already, because if it continues much longer, we’ll bear witness to one hell of an energy crisis… except this time there won’t be a knight in shining armor to come save the day.

Now, let’s add some context, shall we?

A couple weeks ago, we talked about what a real oil panic looks like and how had it not been for the U.S. shale boom that single-handedly rescued us from our addiction to OPEC crude over the last 15 years, today’s energy markets would be unrecognizable. 

I can’t help but wonder if watching U.S. domestic oil output climb 165% between 2007 and our pre-COVID peak of 13 million barrels per day in November 2019 didn’t leave us with a bit of hubris. 

It’s as if we had forgotten what it was like to struggle and took our enormous oil growth for granted. 

So we started poking the bear… In this case it was the Saudis. 

Within the course of a few years, our president went from touching magical orbs with King Salman bin Abdulaziz to threatening the House of Saud in 2021 that there would be “consequences” for the kingdom cutting oil production. 

Those threats laid out by President Biden were supported by the belief that our oil production would continue growing at an astronomical rate and that the oil boom would never stop. 

Spoiler: It has.

More importantly, we know for a fact that the Saudis don’t respond well to threats. Nearly two years later, the Saudis have officially reclaimed their place atop the world’s oil markets. 

Oh, we tried to prevent that from happening when we sold off more than half of our Strategic Petroleum Reserve in a desperate bid to subdue oil prices over the short term… 

But relief in the short term has caused pain in the long term. 

Just this week, the price for a barrel of WTI crude touched $95.

Yet nobody seemed to learn the lesson to not antagonize a group that has taken control of global oil supply. 

Nope, people just kept on poking.

Energy Chaos on an Unprecedented Scale 

When the International Energy Agency released its latest round of energy projections, it updated its Net Zero by 2050 Roadmap — the path to limiting global warming to 1.5°C.

And this time around, it's calling for bolder action.

But what was particularly upsetting to the Saudis and its OPEC allies was IEA Executive Director Fatih Birol's claim that demand for fossil fuels would peak this decade and then begin to decline. 

OPEC’s secretary general had a few threats of his own:

Such narratives only set the global energy system up to fail spectacularly. It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world.

I’ll let you read that however you want, but I’m willing to bet we can forget about those voluntary cuts from the Saudis and Russians going away anytime soon. 

The only question left is: “How do we drill ourselves out of this one?”

We’ll talk about that next week. 

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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