Crude oil, from 70´s to 2023

Crude oil has played a significant role in the global economy and energy sector since the 1970s. Here is an overview of key developments and trends related to crude oil from the 1970s to the present:

Oil Crisis of the 1970s: In the early 1970s, a series of geopolitical events, including the Arab-Israeli War and the OPEC oil embargo, caused a significant increase in oil prices. This led to a global oil crisis, characterized by soaring prices and shortages. It prompted many countries to reassess their energy policies and invest in alternative energy sources.

Price Volatility and Market Fluctuations: Throughout the 1980s and 1990s, the price of crude oil experienced fluctuations due to geopolitical tensions, global recessions, and shifts in oil supply and demand. Prices were influenced by factors such as OPEC decisions, conflicts in oil-producing regions, economic growth, and technological advancements in the oil industry.

Emergence of Non-OPEC Producers: Over time, non-OPEC countries, such as the United States, Russia, and Brazil, increased their oil production capacities. Technological advancements, such as hydraulic fracturing (fracking) and horizontal drilling, enabled the extraction of previously inaccessible oil reserves, leading to a significant rise in non-conventional oil production.

Global Demand Growth: Rapid industrialization and economic growth in emerging markets, particularly in countries like China and India, contributed to a substantial increase in global oil demand. The growing middle class, urbanization, and increased use of automobiles in these countries drove up oil consumption.

Price Peaks and Downturns: The early 2000s witnessed a significant rise in oil prices, reaching an all-time high in 2008. However, the global financial crisis in the same year resulted in a sharp decline in oil prices. Prices recovered gradually but experienced another significant drop in 2014 due to oversupply and slowing global economic growth.

Shale Revolution: The advent of shale oil and gas production, especially in the United States, revolutionized the global energy landscape. The increased production from shale formations, along with advancements in technology, resulted in a surge in domestic oil production and reduced dependence on oil imports.

Focus on Renewable Energy: Concerns about climate change and environmental sustainability have driven efforts to transition towards renewable energy sources. Governments, businesses, and individuals have increasingly invested in renewable technologies like wind, solar, and hydroelectric power. The shift towards renewable energy aims to reduce reliance on fossil fuels, including crude oil.

Price Decline during COVID-19: The COVID-19 pandemic, which emerged in late 2019, had a profound impact on the oil industry. Lockdowns, travel restrictions, and reduced economic activity led to a significant decrease in oil demand. As a result, crude oil prices plummeted to historic lows in April 2020. However, prices gradually recovered as economies reopened and demand began to rebound.

Energy Transition and Decarbonization

As concerns about climate change intensify, many countries have committed to reducing greenhouse gas emissions and transitioning to cleaner energy sources. This transition includes efforts to decarbonize transportation, which heavily relies on oil. The development and adoption of electric vehicles (EVs) and renewable energy technologies are key elements of this transition. Energy transition and decarbonization refer to the process of shifting from fossil fuel-based energy sources, such as coal, oil, and natural gas, towards cleaner and more sustainable alternatives. The primary goal is to reduce greenhouse gas emissions and mitigate the impacts of climate change.

Here are key aspects and initiatives associated with energy transition and decarbonization:

Renewable Energy: One of the central pillars of the energy transition is the rapid expansion of renewable energy sources. This includes solar, wind, hydroelectric, geothermal, and biomass energy. Renewable energy technologies have become increasingly cost-effective and widely deployed, contributing to the decarbonization of electricity generation.

Phasing out Coal: Coal-fired power plants are the most carbon-intensive and polluting sources of electricity. Many countries have set targets to phase out coal and replace it with cleaner alternatives. This transition involves retiring existing coal plants, investing in renewable energy, and implementing policies that discourage the use of coal.

Electrification of Transportation: The transportation sector is a significant contributor to greenhouse gas emissions. The energy transition involves promoting the use of electric vehicles (EVs) and improving charging infrastructure. Electric cars, buses, and trucks powered by renewable electricity can significantly reduce emissions compared to vehicles relying on internal combustion engines.

Energy Efficiency: Improving energy efficiency across various sectors, including buildings, industry, and transportation, is a crucial aspect of decarbonization. Energy-efficient technologies, building insulation, smart grid systems, and energy management practices help reduce energy consumption and the associated carbon footprint.

Carbon Pricing and Policy Instruments: Governments and organizations are implementing carbon pricing mechanisms, such as carbon taxes or cap-and-trade systems, to internalize the social cost of carbon emissions. These market-based approaches create economic incentives for businesses and individuals to reduce emissions and invest in cleaner technologies. There are several European companies, such as Coorest, that are already working and within the blockchain, to reduce the carbon footprint of companies. Of course, this is not only for Europe, but also globally, although perhaps in Asia, for example, the decarbonization of the planet will slow down.

Research and Development: Investment in research and development (R&D) is vital for advancing clean energy technologies. Governments and private sector entities allocate funds to support the development of innovative solutions, such as advanced batteries, hydrogen technologies, and carbon capture, utilization, and storage (CCUS) technologies.

International Cooperation: Energy transition and decarbonization require global cooperation and coordination. Countries participate in international agreements and initiatives like the Paris Agreement, which aims to limit global warming to well below 2 degrees Celsius. Collaborative efforts facilitate the sharing of best practices, technological advancements, and financial resources to accelerate the energy transition worldwide.

Just Transition: A just transition refers to ensuring that the shift towards a low-carbon economy is fair and equitable for all stakeholders. It involves supporting workers and communities affected by the phasing out of fossil fuel industries and providing opportunities for reskilling and employment in clean energy sectors.

Energy transition and decarbonization are essential for mitigating climate change and achieving sustainability goals. This will gradually affect the demand for oil and therefore, in the future, we will have a peak of resistance and from there, the price will begin a slow but downward decline to no longer rise, since if we have no demand, what does a price do?

Countries that are working their economy in the world of oil, have to recycle to other sectors. For example, we are observing how the countries of the Persian Gulf have been diversifying their requirements for years, to other sectors that will produce much more in the future. It is even one of the strongholds in relation to new technology companies, blockchain, tokenization, etc., worldwide.

DATA about the rule of current prices for those interested in oil are:

(DIRECT TAX + OIL PRICE) X the % VAT percentage applied by each country as INDIRECT TAX = PUBLIC SALE PRICE.

Oil, the chart

What can we expect now from the oil price situation?

The price has been in a downtrend since 2008. So much so that the oil future practically went to 0, in 2020, and from there, it recovered to make a descending maximum, of a bull market trap.

It is now in a long-term support zone. The objective of the price will be not to lose this environment, since doing so would enter the main bearish channel again.

If he doesn’t lose it, he will probably try again to go up to $85 zones, at least.

Reminder that these words are not a purchase recommendation, but an analysis of your current situation, under observation.

Good monday!

Jesús Sánchez-Bermejo