Thanks again Arjun for a very nice piece. If I was going to nitpick, I do think the Brent price range probably would need to be $10/bbl, or higher, to ensure the industry generates sufficient FCF and ROCE as unit costs would inflate (both opex and capex) if the industry attempted to increase production to the level you propose, and to incent demand to contract. Otherwise, keep sharing these articles as they are great thought prices and I hope are read by many outside the energy industry to get a better understanding of how the industry works and what is at stake.
In North America the pipeline issue is a very real constraint, and unfortunately, contains so many veto points that stretch out over years.
I think the transition "valley of death" is a major risk, and asking real questions about "where should the last barrell come from?" Is an interesting framing.
One under discussed risk among those interested in climate policy that I simply can't fathom being ignored: these price swings, global supply shocks, and lack of investment uncertainty are the kind of things that will SLOW and damper political efforts towards emission reductions. There is some weird thing going on where folks think the current situation helps their cause, by showing "see we should be at least at 1 or 2mmbd less of domestic oil consumption here in the US and then we'd have more wind turbines and then everything would be fine." Even were that true (it's not) I think the number of voters who see it that way is nearly zero. So the backlash will be very real.
Plans that require 10-30 years of more or less perfect geopolitical stability to maintain popular support for their energy transition models are very bad plans.
You’ve got the fire in your belly Arjun. Excellent piece, well argued.
“I am not in the camp that for US shale that “ESG”, thus far, has been a major driver for why CAPEX growth has been subdued.” This is an important detail that gets overlooked too often. I understand why folks are critical of decarbonisation policies. But we mustn’t lose sight of what’s really been deterring upstream investment in recent years, and it’s not ESG — yet. That seems to be changing, but blaming ESG for past mistakes made by industry/investors is unhelpful & divisive.
Same goes for the ‘renewables/ESG bear some responsibility for events in Ukraine’ line that’s getting some airing at the moment (not in Super-Spiked, I might add). Yes some terrible mistakes have been made in European energy policy, too many to name. But the zealotry of some people to use this f***ed up situation to further an anti-renewables, anti-emissions reduction ideology is extremely unwelcome.
The balance and perspective you bring to this debate is welcome and important Arjun, keep up the good work.
Great piece. I think this is the trap of western environmentalism: we push problems to other corners of the world where we don't have to look at them. Nickle, cobalt, and lithium mining are other great examples of this phenomenon.
Great piece but regrettably I suspect your current administration is too entrenched in virtue signalling to go down the path of, ironically, most virtue. Never ceases to amaze me how dogma can outweigh logic, it’s the same over here in Europe with our friends in Germany.
Thanks again Arjun for a very nice piece. If I was going to nitpick, I do think the Brent price range probably would need to be $10/bbl, or higher, to ensure the industry generates sufficient FCF and ROCE as unit costs would inflate (both opex and capex) if the industry attempted to increase production to the level you propose, and to incent demand to contract. Otherwise, keep sharing these articles as they are great thought prices and I hope are read by many outside the energy industry to get a better understanding of how the industry works and what is at stake.
In North America the pipeline issue is a very real constraint, and unfortunately, contains so many veto points that stretch out over years.
I think the transition "valley of death" is a major risk, and asking real questions about "where should the last barrell come from?" Is an interesting framing.
One under discussed risk among those interested in climate policy that I simply can't fathom being ignored: these price swings, global supply shocks, and lack of investment uncertainty are the kind of things that will SLOW and damper political efforts towards emission reductions. There is some weird thing going on where folks think the current situation helps their cause, by showing "see we should be at least at 1 or 2mmbd less of domestic oil consumption here in the US and then we'd have more wind turbines and then everything would be fine." Even were that true (it's not) I think the number of voters who see it that way is nearly zero. So the backlash will be very real.
Plans that require 10-30 years of more or less perfect geopolitical stability to maintain popular support for their energy transition models are very bad plans.
You’ve got the fire in your belly Arjun. Excellent piece, well argued.
“I am not in the camp that for US shale that “ESG”, thus far, has been a major driver for why CAPEX growth has been subdued.” This is an important detail that gets overlooked too often. I understand why folks are critical of decarbonisation policies. But we mustn’t lose sight of what’s really been deterring upstream investment in recent years, and it’s not ESG — yet. That seems to be changing, but blaming ESG for past mistakes made by industry/investors is unhelpful & divisive.
Same goes for the ‘renewables/ESG bear some responsibility for events in Ukraine’ line that’s getting some airing at the moment (not in Super-Spiked, I might add). Yes some terrible mistakes have been made in European energy policy, too many to name. But the zealotry of some people to use this f***ed up situation to further an anti-renewables, anti-emissions reduction ideology is extremely unwelcome.
The balance and perspective you bring to this debate is welcome and important Arjun, keep up the good work.
Great piece. I think this is the trap of western environmentalism: we push problems to other corners of the world where we don't have to look at them. Nickle, cobalt, and lithium mining are other great examples of this phenomenon.
Great piece but regrettably I suspect your current administration is too entrenched in virtue signalling to go down the path of, ironically, most virtue. Never ceases to amaze me how dogma can outweigh logic, it’s the same over here in Europe with our friends in Germany.