Hello to all existing and prospective partners, and welcome to 2022, which should be another eventful year. And as our tagline “Leading the Way…” says, we would like to summarize what we read about the energy outlook for 2022.
We make no claims to having a crystal ball. No one can forecast longer-term the price of oil, Covid-19 mutations, or what will happen in Washington, DC, but we do our best keeping track from relevant info sources of what the experts think. And one that we check daily is the Wall Street Journal. And we would like to pull together three articles found in its January 5th, 2022 edition that should give a pretty good idea about oil prices this year.
The first is “OPEC is Upbeat on Variant’s Impact”
- OPEC and a coalition of Russian-led producers agreed to continue pumping more crude, pushing oil prices higher as the group bet that Covid-19’s Omicron variant wouldn’t have the sort of devastating effect on demand as previous viral waves.
- They believe the storm is over and will increase production by several hundred thousand BOPD starting in February. Big consumers, like the United States, praised their decision.
- The world community is ready to get back to a “new normal.” That desire, coupled with consistent reports that Omicron is less life-threatening, should bolster travel and economic activities which in turn will increase the demand for fossil fuels. And a surge in European and Asian natural gas prices adds to this upbeat assessment.
The second is “European Climate Crisis Goes Global”
- It starts “Hard to believe, but politics sometimes exhibits a pull toward the center, especially when voters find it difficult to pay their bills, heat their homes and keep their jobs.”
- But that’s happening right now in Europe, thanks to home heating and electricity up 300 percent at the wholesale level since last winter. The mess is framed as the story of many influences -a proverbial perfect storm-but is really a story about coal and hypocrisy.
- Europe, by not diversified its base-load power supply away from dirty coal while also dumping nuclear energy, has invited all the consequences you read about: ill-advised reliance on Russian natural gas, bidding wars against China for LNG (liquid natural gas), and fears of rolling blackouts.
- Though there are firm believers in the risks of man-made climate change, the commodity research firm CPM argues that 2022 will be the year when energy and climate realism will break through.
- European government gestures are not meaningful in the race to combat climate change. To wit: electric vehicles, a favorite for politicians to subsidize, won’t reduce CO2 output but merely shift its location.
- There are real constraints moving for moving to green energy, starting with the unwillingness of voters and consumers to pay for it.
- China has opted out of paying lip service like Europe is still mouthing. Europe’s claimed 20 percent reduction is specious and based on a soft baseline.
- Germany’s rush to shut nuclear power plants, caused by Angela Merkel’s political motives, will force Europe for decades to pay the price.
- From all this has emerged a new trope-sophisticated state failure-for advanced societies’ inability to reconcile means and ends.
- The U.S. is not immune to these pathologies. Witness last winter’s blackouts rolling through Texas.
- Sophisticated state failure is an unadmitted father of the Western World’s drift to populist politics. Harken back to 2008’s “Great Financial Meltdown” and bailouts that gave rise to “Obama birtherism” and the rise of Trumpism. Another cultural war is blooming over Covid policy. Progressives who believe that with enough coercion utopia is within reach is a dangerous outcome.
- More of the above may be in store if Europe keeps playing Russian roulette with its energy supply, which is a vital underpinning of a modern society and every voter’s well-being.
And the third is “The Fight For Ukraine and Taiwan”
- A crisis in the Ukraine may be eminent, and Putin has already achieved three objectives: gained President Biden’s attention, spurred the debate between military or economic retaliation, and massed Russian troops at the border.
- American policy makers have also begun focusing on a potential conflict in Taiwan, one that is coming to a boil more slowly.
- But these events cannot be viewed in isolation. If Russia and China cooperate strategically, the combination of two military fronts would overstress American and allied resources.
- The world is entering a contest for Eurasia-and thus for the world.
And as we always try to do, let’s bring all the above back to Allied Resource Partners. Our takeaway is the same as stated in some of our previous posts. No one knows what will hold longer-term. But please note: there’s money to be made going forward for Allied Resource Partners. And we are confident that all the above jibes with “staying the course” on our current strategy. We continue acquiring attractive leases while drilling and operating low-risk, high-return wells.
We want you to be well informed, because the more you know about O&G, the more you’ll understand why we can say that Allied is leading the way by treating smart, accredited O&G investors the way today’s business climate demands. Please contact us if you would like to know more about our latest Drilling Projects or discuss further any of the items we touched on above.