It was a Venezuelan, Juan Pablo Pérez Alfonso, one of the founding fathers of Opec, who described oil as “the devil’s excrement”, and his country’s dismal recent history proves his point. Venezuela holds what are generally reckoned to be the world’s largest proved oil reserves, but mismanagement has sent its economy into freefall, and the anger that has been building for years broke out into political chaos this week, as opposition leader Juan Guaidó declared himself interim president.
Nicolás Maduro, who was this month sworn in as president for a second term, after winning a rigged election in May, has shown no sign of being ready to step aside, and so far he still has the backing of the army. The US and Canada, along with Brazil, Colombia and several other Latin American countries, recognised Mr Guaidó as Venezuela’s interim president, prompting Mr Maduro to say he was breaking off all diplomatic and political relations with the US, which he accused of trying to foment a coup. The FT’s Andean correspondent Gideon Long wrote a useful guide to what to watch for as the crisis unfolds.
The White House has been considering new sanctions on Venezuela’s oil industry to increase the pressure on Mr Maduro, but at the time of writing had not taken any action. Some analysts suggested Mr Maduro’s regime was likely to collapse, even without any more of a push from the US. Venezuela both exports oil to the US and imports ultra-light oil to dilute its heavy crude. The Trump administration could decide to disrupt either or both of those flows, although there would be some costs for American companies if it did so. The prospect that some US refiners might have to look elsewhere in the world for different and possibly more expensive sources of heavy crude sent their share prices lower. The prospect of possible further disruption to Venezuela’s oil exports has not so far had much impact on global crude prices, however. On Friday Brent was trading at about $61 a barrel, very close to where it began the week.
A critical part of the explanation for Venezuela’s decline lies in the damage done to PDVSA, its national oil company. When the Arab countries nationalised their oil industries in the 1960s and 1970s, they managed to retain many of their skills and capabilities. After Hugo Chávez, predecessor and mentor of Mr Maduro, was elected president in 1998, there was an exodus of experienced oil workers, as PDVSA was “packed with political and military appointments and descended into mismanagement and incompetence”, as the FT’s Jonathan Wheatley put it. Venezuela’s crude production fell to 1.1m barrels a day in December, just a third of its level in the mid-2000s.
It is worth noting that although the decline in oil prices since 2014 has not helped Venezuela, the depth of its economic slump has not been shared by other petro-states. Over the past 10 years Saudi Arabia and Angola, to take two examples of economies that are heavily dependent on oil revenues, have outperformed Venezuela enormously in terms of economic growth.
The future of oil in a world shaped by the US shale revolution and the threat of climate change was one of the topics under discussion at the World Economic Forum annual meeting at Davos. The panellists included Mohammad Barkindo, secretary-general of Opec, Vicki Hollub, chief executive of Occidental Petroleum, and John Hess, her counterpart at Hess. The mood of the discussion seemed convivial: Mr Hess said people should recognise that “Opec members play a very important role in stabilising the market for oil”, while Mr Barkindo observed that the actions of Opec and its allies in cutting production since 2016 had “helped to rescue the US oil industry”.
Separately, but also at Davos, Kirill Dmitriev, chief executive of the government-owned Russian Direct Investment Fund, expressed a similar spirit of peaceful coexistence, acknowledging that dreams of crushing the US shale industry were futile. “For US shale production to go down, you need oil prices at $40 per barrel and below. That is not healthy for the Russian economy,” he said.
Both Ms Hollub and Mr Hess emphasised the new capital discipline of the US shale industry, and suggested US oil production growth would slow from last year’s breakneck pace. Ms Hollub said: “Not as much money is going to be pouring into the Permian basin.” Their comments aligned with a story I wrote about how the flows of capital that have enabled shale companies to pay for their drilling programmes have recently dried up, at least for the time being.
The Energy Information Administration this week published its 2019 Annual Energy Outlook, projecting possible future scenarios for the US out to 2050. S&P Global Platts focused on the outlook for oil, highlighting the EIA’s projection, based on unchanged policies, that “record-breaking US oil production is expected to continue for decades, driven largely by the Permian Basin”. However, the EIA showed different scenarios as possible outcomes, ranging from a high output case with US production going over 20m barrels a day by 2040, to a low case with a peak at just under 13m b/d that could be only five years away. The fact that the EIA’s projections have often underestimated the growth of US oil production has encouraged expectations that the high-output scenario may turn out to be closer to the truth.
Rystad Energy, meanwhile, suggested that US oil production, including lighter liquids as well as crude, could be more than that of Russia and Saudi Arabia combined by 2025.
The EIA also forecast that wind and solar power would be the fastest growing sources of new electricity generation in the US, for at least the next two years. The longer-term projections imply a slowdown in the pace of growth in the 2020s, but the EIA also has a record of underestimating the growth of renewables, and many analysts think wind and solar in the US will also end up outpacing the EIA forecasts.
The discussion of climate change at Davos by executives who had arrived there by private jet was too obvious an open goal for environmental campaigners to miss it. Air Charter Services estimated that there would be almost 1,500 flights by private jets moving in and out of local airfields over the six days around the meeting. The WEF rejected that figure, suggesting there would be only 270 flights during the first three days of the meeting, 14 per cent fewer than last year.
The energy density advantage of oil-based fuels over batteries means that aviation will be one of the toughest sectors to move away from hydrocarbons. If world oil consumption does go into a declining trend at some point, jet fuel is one of the products that is likely to remain in use the longest. Rocky Mountain Institute warned in a report this week that the global aviation industry needed “a radical new plan to achieve its climate goals”, because its emissions are growing faster than earlier forecasts suggested, “and long-term solutions are nowhere in sight”. There is a research and development effort going into electric aircraft, however, and Boeing this week said it had recently held a first test flight for its “all-electric autonomous passenger air vehicle”. It was, wrote The Verge, “a significant step toward a future in which autonomous, electric ‘flying taxis’ zip from skyscraper to skyscraper”.
A record-breaking heatwave has been scorching Australia, straining the country’s power supplies. In the state of Victoria, customers have been hit by rolling blackouts, as the heatwave caused “unanticipated levels of demand” for electricity. As the Australian Energy Market Operator worked to keep the lights on, it ordered Alcoa’s aluminium smelter in Victoria to cut its power usage for about 100 minutes under the system’s emergency process. Lily D’Ambrosio, Victoria’s energy minister, identified shutdowns and reduced output at several of the state’s coal and gas-fired power plants as critical factors in causing the blackouts. The AEMO warned that Australia’s ageing coal plants could be expected to break down more often in the future.
The question of how to replace that failing capacity is fiercely debated. The authorities have been urging customers to limit their demand wherever possible, to help keep the grid stable, but Pauline Hanson, a senator for Queensland who has been described as “the Donald Trump of Australia”, had a different idea. On Twitter she urged people to “go out and start up everything: go and start your washing machine, ironing, vacuum cleaning, air-conditioning, whatever”, to “send a clear message to those out there” that the country needed more coal-fired power plants.
Meanwhile, renewable energy is booming in Australia. Renewable generation on the grid in Australia’s national electricity market grew from 13.4 per cent in December 2017 to 17.6 per cent in December last year. Including rooftop solar, the renewable share last month was 21.4 per cent of electricity supplied to consumers.
The estimated number of people killed in the gasoline pipeline explosion in central Mexico last week has risen to 107. The explosion is believed to have happened after the pipe was deliberately punctured, drawing hundreds of people hoping to collect fuel.
People talk a lot about “the energy transition” away from fossil fuels, but rarely reflect on how rare it is for the world to give up using a source of energy. I wrote about some of the implications of that history, with a big debt to Richard Newell and Daniel Raimi of Resources for the Future, who explored the idea last year.
And finally: MuckRock is a US non-profit collaborative news website that helps people use freedom of information laws to obtain and share government documents. It stores hundreds of thousands of pages, but few can be as quirky as the story of “the Green Reaper”: a bizarre mascot for the US Department of Energy. The pictures will haunt your nightmares.
Other views
Nick Butler — Renewables boom fails to dent investment allure of hydrocarbons
Nick Butler — Falling demand is the energy sector’s next challenge
David Sheppard — Investors risk losing faith in returns on offer from ‘Big Oil’
FT View — Venezuelan crisis calls for concerted diplomacy
Colby Smith — Venezuela bondholders are betting on Maduro’s downfall
Edward Luce — The risks of Trump’s Venezuela freedom cry
Roula Khalaf — Seeds of doubt sown among the elite on the slopes of Davos
FT View — The cylinders of the global economy are starting to sputter
John Kemp — The global economy is headed for recession
Philip Verleger — What’s behind oil’s slow flash crash?
Quote of the week
“I think it is insane that people are gathered here to talk about the climate and they arrive here in a private jet.”
— Greta Thunberg, the 16 year-old Swedish climate activist, arrived at the World Economic Forum in Davos and was scathing about the transport choices of some of her fellow attendees. She has inspired a wave of school strikes and protests around the world, including a march with an estimated 35,000 children in Brussels on Thursday.
Chart of the week
This comes from a fascinating report for the Oxford Institute for Energy Studies, which looks at how expectations of an energy transition away from fossil fuels might be influencing large investors’ risk preferences. The authors say the message from this chart, derived from a survey of 26 institutional investors, is that expectations of such a transition have started to affect views of required hurdle rates for oil, gas and coal projects. “Investors are demanding a higher hurdle rate in order to invest in long cycle oil and coal projects,” they write.
There is plenty of room for debate about what their findings really mean, but it is an original and important piece of work. Beyond that headline result the report, by Bassam Fattouh, Rahmatallah Poudineh and Rob West, also has plenty of other thought-provoking insights, and is well worth reading in full. Thanks to Jamie Webster of the Boston Consulting Group for pointing it out on Twitter.
JuanP on Sat, 26th Jan 2019 4:30 pm
“Tucker Carlson: Our borders are vulnerable, and Dems are trying to make the problem worse. That’s the truth”
https://www.foxnews.com/opinion/tucker-carlson-our-borders-are-vulnerable-and-dems-are-trying-to-make-the-problem-worse-thats-the-truth
makati1 on Sat, 26th Jan 2019 5:00 pm
Faux news Juan??
makati1 on Sat, 26th Jan 2019 5:18 pm
It’s ALL about the oil and $$$$. The US got pissed when American oil companies got tossed out of the country and now they will try to destroy the country in a fit of delusional insanity. Perhaps it has not registered in their warped brains that Venezuela has a few powerful partners, Russia and China to name two, and the Monroe Doctrine is obsolete?
https://en.wikipedia.org/wiki/Monroe_Doctrine
BTW: This is my first posting today, not the above. But then, that is obvious.
makati1 on Sat, 26th Jan 2019 5:37 pm
“Venezuela’s top military attaché at the Washington D.C. Embassy has broken with the Nicolás Maduro regime Saturday, and has urged other members of the Venezuelan armed forces to recognize Juan Guaidó as the legitimate interim president, according to the Miami Herald.
According to Silva – a colonel in the National Guard, “A high percentage of diplomats here do not agree with Maduro’s usurpation of power, but there’s always fear of what can happen to relatives in Venezuela and the uncertainty of what can happen in a foreign country. Even diplomacy is now prisoner of the minority that has systematically seized control of the power in our country.”
Many members of the Venezuelan armed forces fear reprisals by Maduro, however Silva emphasized that honest members of the military must step forward and reject the regime “because of Maduro’s usurpation of power following his allegedly fraudulent reelection,” according to the Herald.
“Enough! Leave aside the illegal control of our territory and the executive power. The leaders have become millionaires on the backs of the people,” he said. “Captains, commanders: Think about everyone who suffers. Don’t forget that your wives also can’t find milk for your children. Don’t forget that your mothers and fathers also can’t find pills for their [blood] pressure,” said Silva.
“Enough already! Let’s recognize the man who under the law is the true president of Venezuela, Juan Guaidó.”
https://www.zerohedge.com/news/2019-01-26/venezuelas-highest-ranking-military-attache-flips-maduro-urges-armed-forces
More Davy Identity Theft on Sat, 26th Jan 2019 6:02 pm
makati1 on Sat, 26th Jan 2019 5:00 pm
more juanpee identity theft on Sat, 26th Jan 2019 6:04 pm
More Davy Identity Theft on Sat, 26th Jan 2019 6:02 pm
JuanP on Sat, 26th Jan 2019 6:10 pm
Hi, Makati! I haven’t posted anything here in days. It has been all sock puppets and identity theft by Delusional Davy. I know he is doing the same to you and others, too. He seems to have completely lost it! His multiple personalities seem to be completely out of control. He is obviously insane! I fear for the twins; I think their lives are in danger. I wouldn’t be surprised at all to read in the news that nine year old twins were murdered in the Ozarks and left to rot there. Davy is a danger to himself and everyone around him. What a sad fuck!
Davy on Sat, 26th Jan 2019 6:22 pm
Liar, you have been stealing my identity and play sock games for days now. If you keep it up Juan then everyone suffers but you don’t care do you? You have made it clear multiple times you don’t give a rat’s ass what others think.
JuanP on Sat, 26th Jan 2019 6:27 pm
Projecting again, Davy? LOL!
makati1 on Sat, 26th Jan 2019 6:29 pm
JuanP, It was obvious that most posts supposedly by you were really Davy exercising his warped mind. I have not posted since “makati1 on Sat, 26th Jan 2019 5:18 pm” The post later about Venezuela was Davy. He still doesn’t know how to separate paragraphs or make rational comments. If he has twins, they must be Tweedledee and Tweedledum unless they were fathered by a neighbor.
JuanP on Sat, 26th Jan 2019 6:34 pm
Yeah, he has gone full psychotic!
Davy on Sat, 26th Jan 2019 6:50 pm
What’s the matter JuanP has your game not turned out as planned? I can turn your shit back on you and make Makato pay at the same time. See how bad behavior backfires. I can make comments too. You haven’t made one in weeks. You are waste of our time and a mental case.
Davy on Sat, 26th Jan 2019 6:55 pm
Makato, I say something. I contribute. Your contributions are slip slidin and other one liners. You are a senile old man alone with no family. Juan is a nobody with no family. No wonder the two of you are so bitter and full of hate. You are going to pay for what Juan is doing. Pay backs are a bitch. Lol. That is what you like to say but now it is said to you.
Davy on Sat, 26th Jan 2019 7:21 pm
Oops, sorry everyone. I lost my shit again. That seems to be happening more and more lately.
I AM THE MOB on Sat, 26th Jan 2019 7:24 pm
The world is swimming in $244 trillion of debt
https://markets.businessinsider.com/news/stocks/debt-around-the-world-hits-244-trillion-near-record-2019-1-1027872023#
JuanP on Sat, 26th Jan 2019 7:28 pm
Oops, sorry everyone. I lost my shit again. That seems to be happening more often these days. I am crazy and I am taking the forum down with me.
makati1 on Sat, 26th Jan 2019 7:30 pm
Juan, you are projecting again
makati1 on Sat, 26th Jan 2019 7:41 pm
I go away for an hour and Davy spews goat shit all over the site. This is my first post since 6:29PM. Davy/MOB is not worth replying to.
JuanP on Sat, 26th Jan 2019 7:48 pm
You are projecting again makati
makati1 on Sat, 26th Jan 2019 7:54 pm
MOB: TOTAL US DEBT = $72 Trillion and climbing. That does not include unfunded liabilities which add another $122 Trillion. Then there is State and local government debt adding another $3 Trillion. Add personal debt, another $19 Trillion. And only god knows how much corporate debt is out there, but it is in trillions. Everyone born into the US is already $1 million in debt. Tax slaves.
TOTAL US debts equal: $216,000,000,000,000.00+++ or $216 TRILLION PLUS.
http://www.usdebtclock.org/
Hypocritical America always pointing the finger at others instead of looking in the mirror. China does not have $122 Trillion in liabilities to pay for socialist expenses like Social Security, Medicare, Medicaid, etc. Those have to be paid or the US is done, over, finished. But you keep spouting that USMSM propaganda like it is fact.
Davy on Sat, 26th Jan 2019 7:59 pm
Nothing gets me more emotionally upset than knowing my taxes are paying for your retirement makato. I feel another temper tantrum coming on.
I AM THE MOB on Sat, 26th Jan 2019 8:01 pm
Russiagate is proof that the American Ideology can’t sustain itself without a boogeyman..
First it was the Soviets..Then it was Iraqis Then Isis..And now the…Soviets again?
Maybe one day Americans will actually learn to face the real material conditions of their society..
makati1 on Sat, 26th Jan 2019 8:04 pm
Juan, I am not retired. Im a pimp.
I AM THE MOB on Sat, 26th Jan 2019 8:06 pm
Davy
You mean your parents taxes? Because we all know you didn’t get to where you are now by your own success in life..You got there by riding mommy and daddy’s coat tails!
I AM THE MOB on Sat, 26th Jan 2019 8:11 pm
Davy, you sure are superior to JuanP the gimmigrant. At least you are a native. Wet back juan needs to head back to his failed South America.
Davy on Sat, 26th Jan 2019 8:12 pm
I wish I was a pimp. Goat sex is getting old.
Davy on Sat, 26th Jan 2019 8:16 pm
Davy, I am secretly into sex with animals and fantasize about your goats. I am getting bored with Boney Joe love.
Davy on Sat, 26th Jan 2019 8:16 pm
I’m betting the Nazis didn’t like wet backs either.
Build The Wall Donald!
Davy on Sat, 26th Jan 2019 8:18 pm
I’m so messed up now that I can’t even remberber which sock puppets to use anymore.
makati1 on Sat, 26th Jan 2019 8:19 pm
Stop the madness Juan
Davy on Sat, 26th Jan 2019 8:20 pm
FUCK! STUPID CELL FONE SPELL CHEKKER!
Anonymouse on Sat, 26th Jan 2019 8:21 pm
Juan, get help. You can’t stop. I hate socks and
Identity theft.
onlooker on Sat, 26th Jan 2019 8:21 pm
The soft coup of bringing down the Venezuelan economy has worked, so now the people want Maduro out. The shock doctrine disaster capitalism working as intended. And to add insult to injury, the rich countries want to tell Venezuelans who should and is governing them
Juan on Sat, 26th Jan 2019 8:22 pm
Sorry makati1, I have no control over Davy’s madness.
JuanP on Sat, 26th Jan 2019 8:22 pm
I am having so much fun guys. Who cares what you dumbasses think
makati1 on Sat, 26th Jan 2019 8:24 pm
Bullshit Juan. You are insane. Get help man
makati1 on Sat, 26th Jan 2019 8:24 pm
Davy, thanks! And keep paying them! I enjoy the extras they buy here, like good wine from Spain and Swiss cheese from Germany. Not to mention adding to my resource and SF book library and helping my neighbors. A reliable income stream.
Tell your loser son, MOB he is just jealous of my sucess and my retirement in the land of eternal summer, while he freezes his ass off in some Chicago slum.
Gotta go. A nice Sunday morning here. already in the low 80s. LATER! LOL
makati1 on Sat, 26th Jan 2019 8:27 pm
BTW: “makati1 on Sat, 26th Jan 2019 8:24 pm” NOT ME!
I AM THE MOB on Sat, 26th Jan 2019 8:28 pm
Far-right activity at universities rising as more young people deny Holocaust, experts warn
https://www.independent.co.uk/news/education/education-news/far-right-holocaust-memorial-day-denial-universities-jewish-students-antisemitism-extremism-a8747181.html?utm_term=Autofeed&utm_medium=Social&utm_source=Twitter#Echobox=1548553627
I AM THE MOB on Sat, 26th Jan 2019 8:28 pm
Mak, you are a poor old man with no life. I thought you had a farm. Shouldn’t you be feeding your monkeys?
makati1 on Sat, 26th Jan 2019 8:29 pm
You are projecting MOB
I AM THE MOB on Sat, 26th Jan 2019 8:33 pm
Onlooker
Great comment like usual..
onlooker on Sat, 26th Jan 2019 8:39 pm
Yea Mob, I am back in the madhouse here. But, hey the whole world is now a madhouse haha
Cloggie on Sat, 26th Jan 2019 8:55 pm
“The soft coup of bringing down the Venezuelan economy has worked, so now the people want Maduro out. The shock doctrine disaster capitalism working as intended. And to add insult to injury, the rich countries want to tell Venezuelans who should and is governing them”
It is precisely the other way around. Venezuela got in a tailspin when under Chavez capitalism was abolished. His intentions were good, helping the poor, but the measures had the opposite effect: now everybody is poor.
https://www.bloomberg.com/quicktake/venezuela-price-revolution
“Far-right activity at universities rising as more young people deny Holocaust, experts warn”
Yes mobster, the internet is a very rightwing medium, I can sing a song about that! But holohoax-denial is very easy to defeat: just give a name and proof of a person who was gassed in one of the six so-called extermination centers. Not 6 million, a single name is enough and we will never bring up the subject again. Just to ensure that the stinking Alllies didn’t invent the hoax to create the moral excuse for their rotten gains. I mean, even you mobster admit that 9/11 was a hoax and you gloat about it. You could of course do the same with the hoax. Success!
twocats on Sat, 26th Jan 2019 9:06 pm
Every time I see a picture of Venezuelan protestors “in the street” they look like really good. Clean, well fed, fashionable clothes and hair. There was that one thing a couple months ago where they were flinging poo around to demonstrate how awful things had become, but even in the Poo videos they were pristine. this fucking thing of where everyone is starving in venezuela and flesh sagging off their decimated corpse like bodies, I mean – show me one flipping picture you can’t find one
Cloggie on Sat, 26th Jan 2019 9:16 pm
Another US attempt to regime change underway, initiated by Pence, Pompeo, Bolton and Rubio and mindlessly supported by Trump, on the gangster principle of attempting to seize half of the oil, just as was the intention with Iraq and we all know how well that worked:
https://www.lewrockwell.com/2019/01/no_author/trump-recognition-of-rival-venezuelan-government-will-set-off-a-diplomatic-avalanche/
https://www.moonofalabama.org/2019/01/venezuela-trumps-coup-attempt-is-based-on-a-seriously-flawed-plan.html
Cloggie on Sat, 26th Jan 2019 9:24 pm
Uh-oh, two key US allies, Japan and South-Korea go at eavh other’s throat:
https://edition.cnn.com/2019/01/26/asia/south-korea-japan-spat-intl/index.html
China laughing of course.
I AM THE MOB on Sat, 26th Jan 2019 9:24 pm
Holocaust Survivor Receives Threats After Criticizing Germany’s Far-right AfD Party
https://www.haaretz.com/world-news/europe/holocaust-survivor-receives-threats-after-criticizing-germany-s-far-right-afd-party-1.6873946
I AM THE MOB on Sat, 26th Jan 2019 9:29 pm
CLogg
Chavez didn’t abolish capitalism you ignorant fool..
What socialism? Private sector still dominates 2/3 Venezuelan economy despite Chavez crusade -AP
https://www.foxnews.com/world/what-socialism-private-sector-still-dominates-venezuelan-economy-despite-chavez-crusade
You are ignorant its astonishing..And you post an article from Bloomberg a capitalist owned billionaire media network..Just like you post from sites that are biased for renewables and the tech industry..And you never see the obvious (conflict of interest)..
I AM THE MOB on Sat, 26th Jan 2019 9:47 pm
Vladimir Lenin and the Order of Bolsheviks
https://i.redd.it/dmh6h7ir8vc21.png