Dr Nakhle talks about inflation levels which are still at record highs relative to recent decades. There was a lot of excitement about the data this week which showed a slowing down of inflation in the US, but that was premature. Yes – we are seeing a slowdown on the back of high commodity prices and supply chain bottlenecks are easing, but this does not mean that central banks are going to stop, watch and observe.
We may see a little more leniency as a reaction to market data but that doesn’t mean it’s going to be a U-turn. Still, there is an increasing perception that the Fed may, after all, end up having a soft landing and avoid causing a disastrous recession and collapse in economic growth. That’s the kind of mood that we see today.
She further comments on the direction for OPEC+ decision making into 2023. Their monthly oil markets report published this week was consistent with that of last month but there was a sense of a bit more optimism in terms of demand, and less concern about supply, particularly from Russia. Their assumption for that loss for 2023 has been at under a million barrels a day, less than half of what the IEA is forecasting for the country. On balance, Dr Nakhle highlights that we should not expect a significant change in OPEC+ policy at the beginning of next year.
With respect to why we are still not seeing more CAPEX investment at these oil price levels, she explains that when we look at inflation, we tend to think about consumers, but we also need to think of investors. The cost of capital for doing business has also increased so we cannot look at high oil prices and expect that to automatically lead to investment. The other challenging dimension for oil companies is expected prices.
Dr Nakhle is joined by James McCallum, CEO and Chairman of Xergy Group, and Professor of Energy at Strathclyde University, and Albert Stromquist, Principal, Lanstrop Advisors. Sean Evers from the Gulf Intelligence moderates the discussion.
Watch the full discussion:
“Energy prices and inflation: Politics trump the economics“, Dr Carole Nakhle, Dec 2022
“Oil market dynamics ahead of OPEC+ meeting“, Dr Carole Nakhle, Dec 2022