The world is unlikely to return to its pre-crisis energy situation as countries reassess security strategies and diversify supplies, which will have long-term impacts on policy and investment decisions, says an S&P Global Energy expert.
The world is unlikely to return to the pre-crisis energy situation as countries respond to recent disruptions by reassessing energy security strategies, diversifying supplies and making new investment decisions, according to Jim Burkhard, Vice President and Head of Research for Oil Markets, Energy and Mobility, S&P Global Energy.
“Well, the world’s changed, and I don’t think we’ll get back to a pre-war situation because, one, the countries are going to react to this crisis. You’re not simply going to go back to, OK, it’s over. We’re going to go back to how everything was,” Burkhard told ANI on the sidelines of S&P Global Energy’s New Delhi Energy Briefing. He further added that there will be countries looking in the Middle East to expand pipeline capacity to get around Hormuz. There’ll be other countries looking to diversify, maybe try to produce more oil and gas, maybe use more electricity and transportation.
Long-term Impact on Policy and Investment
Burkhard said the recent energy disruption would have a long-term impact on energy policy and investment decisions, particularly in Asia. “So we’re not going to go back to the way things were. The world never does. It always changes. And this crisis will reverberate in energy policy and investment decisions around the world, particularly in Asia, for a long time to come,” he said.
He said the disruption was largely an Asia-centred crisis, affecting economies across South Asia, Southeast Asia and Northeast Asia. “Japan and Korea and China, they have called upon their inventories to help cushion it. They had a different set of tools to adjust to it,” Burkhard said. “But I think if you’re a consumer, if you’re a taxi driver in Jakarta, a farmer in Thailand, trying to secure LPG to cook for your family in India, yeah, you may have felt it in some way, shape or form. It hasn’t been as bad as one would have anticipated. But I think the impact was there,” he added.
Global Crude Oil Prices
On global crude oil prices, Burkhard said the market adjusted better than expected despite concerns over supply disruptions. “The short answer is the world was able to adjust at a much lower price than anticipated,” he said.
He said crude oil import demand declined significantly in East Asia, particularly in China, Japan and South Korea, which reduced pressure on prices.
He also pointed to ample oil inventories before the crisis and higher exports from the United States as factors that helped stabilise markets.
Potential Upward Pressure on Prices
However, Burkhard said oil prices could face moderate upward pressure in the coming months as companies look to replenish inventories that have declined sharply. “We’ve had inventories fall at a record pace over the last two and a half months. So how comfortable will companies be with inventories at lower levels? We’re going to find out. If they’re not comfortable, they’re going to be buying more oil, which could put some moderately upward pressure on prices over the coming months,” he said.
India’s Energy Outlook
On India’s energy outlook, Burkhard said the country remains one of the leading sources of global energy demand growth and is emerging as the leading contributor to oil demand growth worldwide. “India is a leading source of energy demand growth, and it’s becoming the leading source of oil demand growth among any country in the world. Large market, dynamic market, it’s growing,” he said.
He said India would require multiple energy sources to meet its rising demand and there would be no single solution. “A strategy of all of the above, where you need all types of energy, whether it’s biofuels, traditional oil and gas. You know, there’s not a single solution. It’s probably a number of different solutions that can come together to satisfy the growing energy demand in India,” Burkhard said.
Crude Oil Price Outlook
On the crude oil price outlook, he said prices would continue to fluctuate depending on market conditions and geopolitical developments, including developments involving Iran and the United States. “Our centre of gravity for oil prices is around USD 75. And we’ll have prices above it and below it. You know, there’s no fixed spot. We never reach an end in oil prices. Like, oh, here we are. This is the oil price forever. No, we’ll never have that,” Burkhard said. (ANI)
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