Commodity Update (January, 2023)

As the charts in this publication demonstrate, energy prices across the board have accelerated over the last 12 months, but rather than caused by Russia’s decision to turn off the gas taps, it has merely accelerated what was already a precarious position.

Nevertheless, by the way some people are acting, you'd be hard pressed to identify an crisis. So what is the problem?

In our opinion, we are in a supply side squeeze of our own making due to lack of investment. This has been driven in part by the drive to placate single issue pressure groups, by politicians, banks and company managements. As a consequence, current production, precipitating what we have previously spoken of as “forward supply attrition.”

Clearly, most politicians lack an understanding of energy markets, and oil and gas specifically. Whether that is ignorance or stupidity, none are good for the consumer.

Nowhere is that more amply demonstrated than with the Dutch price gearing and the UK Energy Levy, the latter setting back investment in the upstream at least a generation.

So it begs the question, do politicians see this as a crisis of their making? The answer to that is no, they can’t, because what they have done is make the supply side crisis worse.

To get an Excel spreadsheet of January's Forward Probability Curves, contact Oil & Gas Advisors here.