Published on April 30th, 2018 | by Steve Hanley0
Electric Car Jitters May Drive Oil To $300 A Barrel
April 30th, 2018 by Steve Hanley
Opinions are like noses — everybody has one. An opinion is usually worth precisely what you paid for it — sometimes less. But if your name is Pierre Andurand and you are one of the best known oil hedge fund managers in the world, your opinion may actually be worth listening to. Andurand was one of many commodity fund managers who met with Saudi oil minister Khalid Al-Falih last July as OPEC was considering whether to raise oil production.
Andurand tweeted on April 30th that concerns about the impact of electric vehicles on future demand for oil was limiting investment in projects with long lead times. “So paradoxically these peak demand fears might bring the largest supply shock ever,” he wrote. “If oil prices do not rise fast enough, $300 oil in a few years is not impossible.”
That was enough to get the people at Bloomberg interested. They report that many in the oil business believe higher prices might be bad for the world economy but Andurand and Al-Falih disagree. “So no, $100 oil will not kill the economy,” Andurand tweeted. “And we need +$100 oil to encourage enough investments outside of the U.S.”
A spokesperson for Andurand Capital Management declined to discuss the tweets — which have since been deleted — with Bloomberg. But Al-Falih is on record as saying recently that prices could rise above their current level of about $75 a barrel without doing economic damage. “We have seen prices significantly higher in the past, twice as much as where we are today.”
He notes the price of Brent crude rose to $150 a barrel in 2008 without dire consequences [<sarcasm> if you ignore the global economic crisis that followed from the collapse of the banking industry, wiping out trillions of dollars in wealth worldwide </sarcasm>].
Crystal balls are notoriously inaccurate, so Andurand’s warning may be just background noise that can be safely ignored. But we know money is what moves markets. Politicians aren’t having much luck enacting carbon taxes to offset the government benefits fossil fuel companies enjoy, so $300 a barrel oil might actually be a boon to the renewable energy and electric vehicle industries, as people rush to “green” solutions that are cheaper.
Imagine what fun it would be to see acres of used Stupid Duty pickup trucks for sale on dealer lots as manufacturers race to bring efficient cars back to their showrooms — the very same efficient cars they are busy running away from today. Some super expensive oil might be the ultimate weapon for “Keep It In The Ground” advocates.