Oil industry insiders from around the world will come together in Houston Texas this week for the annual IHS CERAWeek conference – often dubbed the “energy industry Davos.” And with the heady days of $140 a barrel oil a long way back in the rear view mirror; the mood is likely to be as gloomy in Houston as it was at the start of this year’s Davos conference.
The world is currently awash with oil that nobody wants to buy even at $30 a barrel. If that wasn’t enough to dampen the mood, the best that OPEC can offer is to agree not to increase production any further. But even this is unlikely to materialise as Iran – recently freed from sanctions – and Iraq have committed to increasing their oil output. In these circumstances, everyone is hurting. Oil producing countries have been forced to liquidate investments, increase taxes and impose price rises in order to make up the losses on selling oil cheaply. Importing countries face a fall in revenue because of the fall in tax receipts on cheaper fuel. North American fracking and tar sands producers are looking into the abyss of bankruptcy as they continue to sell $60 oil for $30.
It should come as no surprise that the opening session at IHS CERAWeek is titled “Energy Markets in Turmoil: The shape of things to come”.
Nor is the conference solely concerned with the storm clouds coming from within the oil industry. Also on the opening day are sessions on: “Energy Strategies after COP” “Financing the Energy Future” and “Navigating the Storm” – as industry insiders realise that international climate change policies and growing financial instability and disinvestment threaten the entire energy industry.
As happened at Davos, the mood may be cheered by predictions that technology – in this case advances in renewables like wind and solar – look set to provide investors with a better rate of return than fossil carbon. It is no accident that the special “Diner and Keynote” on Thursday evening is to be addressed by JB Straubel from Tesla – a company that has yet to make a profit, but which keeps promising a carbon-free renaissance. As with Davos, however, this technobabble may amount to little more than whistling in the dark, as it becomes increasingly obvious that the days of cheap (to extract/generate) energy are over for good.