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Andrew Critchlow

Articles by Andrew Critchlow

Oil pipelines not Royal Navy warships will solve Hormuz Iran threat

4 days ago

Deploying more of the Royal Navy to protect oil tankers from Iranian attack as they sail through the Strait of Hormuz is a short-term fix to a historic problem of providing energy security in the Persian Gulf.
Instead of Britain adding to the crowded fleet of warships converging on the region, new export routes such as pipelines and canals should be opened up to provide long-term peaceful alternatives that would finally reduce the world’s dependence on the narrow 21-mile-wide channel dominated by Iran’s Revolutionary Guards.

Slightly more than 20 million b/d of crude oil – around a fifth of the world’s supply – is shipped out of the region under the gun sights of Iran’s hardline military forces, now overlooking the channel that is currently policed by the US Fifth Fleet. US President

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OPEC is playing into Thunberg’s hands on climate change

11 days ago

OPEC would be wise to avoid picking a fight with Greta Thunberg. The 16-year-old poster child of the Extinction Rebellion movement wants to bring the fossil fuel era to an abrupt end, regardless of the economic risks. Branding her populist methods an enemy could make big oil an easier target for protesters to aim at.
That is exactly the mistake OPEC’s Secretary General Mohammed Barkindo has made. The head of the oil cartel – which pumps just under a third of the world’s crude – was quoted last week saying that attacks leveled at producers by a “growing mass mobilization of world opinion” had become “perhaps the greatest threat to our industry going forward.”

Unabashed, Barkindo doubled down by arguing “civil society is being misled to believe oil is the cause of climate change.” All music

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UK needs fuel tax reform to pave way for mass EV adoption

26 days ago

The UK wants to be a world leader in the fight against climate change.
Committing to reduce greenhouse gas emissions to almost zero by 2050 is an admirable but expensive and difficult goal to achieve.

Counter-intuitively, cutting taxes on fossil fuels now may be a better place to start than continuing to milk dry the majority of road users until they are forced into electric cars.
One idea could be to abolish fuel duty all together and instead levy a single charge for vehicle road use, which would treat all motorists equally based on their type of transport. This could be structured as an annual payment that would replace the existing system of road tax and fuel duty. It would also limit the government’s exposure to a catastrophic loss of revenue if consumers switch to electric vehicles

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Oil traders have bigger worries than a new Hormuz tanker war

June 18, 2019

Oil tankers ablaze in the Gulf of Oman and the US pointing the finger at Iran should be enough to send the price of the world’s most vital commodity skyrocketing.
Instead, oil prices have barely budged. Traders are not buying into the theory that Tehran wants a war, but they are worried about demand.

Dated Brent assessed by S&P Global Platts – the world’s most important oil benchmark – spiked by over 4% following the attacks on June 13 and traded briefly just above $62/b. On the face of it, this modest rise doesn’t reflect the risk to almost a fifth of the world’s oil shipped through the Strait of Hormuz, a narrow 21-mile-wide channel separating Iran from the Arabian Peninsula.
“I see the limited reaction in the crude oil market as an indication of traders saying ‘hang on a minute’,” said

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With oil prices falling, Putin has OPEC over a barrel

June 10, 2019

OPEC is learning the dangers of dealing with the Kremlin. President Vladimir Putin now has the group’s Middle East kingpin Saudi Arabia over a barrel and can name his own terms to continue their partnership.
The oil cartel depends on extending its alliance with Russia to keep restricting supplies if it stands any chance of engineering a quick rebound in prices.

The price of Brent crude has collapsed by almost 15% since April, briefly falling below $60/b last week. Depressed prices are good news for consumers, but bad for OPEC’s petrodollar economies led by Saudi Arabia, which wants the group and its allies to extend production cuts at least until the end of the year.

“On the OPEC side a rollover is almost in the bag,” said Saudi oil minister Khalid Al-Falih trying to reassure the market

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Trump won’t gamble with US strategic oil stocks despite supply disruption risks

May 28, 2019

Keeping fuel prices low is a political priority for US President Donald Trump. Just don’t bet on him gambling with America’s emergency oil stocks to achieve a second term in office, at the risk of jeopardizing energy security for the world’s largest economy.
Created in the early 1970s, soon after the oil shock caused by OPEC’s disastrous response to the Yom Kippur war, the Strategic Petroleum Reserve (SPR) remains arguably America’s most important economic buffer. Ironically, the first oil pumped into the giant salt caverns acquired by the US government was shipped from Saudi Arabia.

The SPR was created to ensure the US would never again be held hostage by the oil-rich Persian Gulf states, which still wield phenomenal power to influence the price of the world’s most important commodity.

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US war with Iran unlikely, but would devastate oil markets: Fuel for Thought

May 20, 2019

Drone attacks on pipelines in Saudi Arabia and the mysterious alleged sabotage of tankers near Fujairah sent pulses racing, but a phony war in the Persian Gulf failed to trigger a feared triple-digit surge in crude prices.
A hot war, however, between the US and Iran could be an entirely different matter.

Tehran has repeatedly threatened to shut down the Strait of Hormuz in the event of an outright conflict with America and its Arab allies. The chokepoint is an obvious target. Over 18 million barrels of oil are shipped daily through the 21-mile-wide channel that separates the Islamic Republic from the Arabian Peninsula.
In 2008, worries that Iran would blockade the strait helped to send oil prices skyrocketing to a record $147/b, a level not achieved since.
“A hot war in the Gulf,

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African swine flu impact spreads over Chinese economy, global commodity prices

May 15, 2019

Bacon could soon be off the fried breakfast menu. African swine flu is sweeping across South East Asia and threatening to spread even further after decimating some pig farmers in China, which consumes more pork than any other country. The virulent disease is now creating a domino effect for commodities markets, farmers and consumers.
HSBC’s closely watched aggregated commodity price index of 20 key resources gained 2% last month, with the cost of pork showing the biggest increase. Pork prices tracked by the bank’s commodities research unit gained by almost 40%. The cause of this unwelcome inflation is China’s pig crisis.

“African swine fever has had a significant impact on the global pork market recently,” warned Paul Bloxham, chief economist for Australia and New Zealand at HSBC in his

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US Permian shale takeover battle is a warning for OPEC

May 1, 2019

OPEC should take note of the $55 billion bidding war raging to buy US oil producer Anadarko.
Chevron and Occidental are competing to acquire the unconventional driller. A deal could signal a wave of further consolidation across the Permian Basin and US oil patch, potentially with big implications for the Middle East dominated cartel.

Chevron was on track to become the dominant player in US onshore shale before Oxy swept in this week with a bold $38 billion cash-and-stock counter offer, worth $76 a share, to buy Anadarko. Although the target company has ventured recently into developing gas projects in West Africa, its main attraction for giant petroleum predators is much closer to its home in Texas. Oxy’s offer is now viewed as the “superior proposal”, the company’s board said on Monday.

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Saudi Aramco’s riches disguise its risks: Fuel for Thought

April 8, 2019

Saudi Aramco is by far the most profitable company on the planet and produces more oil than any other single entity, but there are still doubts about the viability of its stalled initial public offering.
The problem for Aramco is that its weaknesses are as obvious as its strengths.

Riyadh’s dream of raising $100 billion by selling a 5% stake in the state-owned oil giant had seemed entirely dead until the company opened its books.
Just over a week ago, Aramco gave a rare glimpse into its financial treasure chest and revealed a pot of gold, which has reawakened interest in its potential listing. At $224 billion, its earnings before interest, tax, depreciation and amortization are three times the size of Apple.
The $111 billion the company made in net profit last year makes it bigger in

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Big oil’s electric dreams could create new energy cartels

March 20, 2019

Oil companies want to become power utilities to meet rising
demand from electricity in transport and from growing populations. The strategy
makes sense, but would also bring risks for regulators and consumers if it were
to create a new breed of gigantic energy-controlling monopolies.

On one hand, watchdogs in developed markets such as the UK should welcome the introduction of relatively new players like Shell and BP to challenge the Big Six conventional utilities. On the other, electricity markets are politically sensitive and oil majors would make easy targets for politicians keen to be seen protecting consumers if profits are put too far ahead of the public good.

The Labour Party has threatened to nationalize parts of the electricity industry if it gains power in Britain.

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Toxic air catastrophe triggers scrap metal revolution in China

March 14, 2019

Minerals producers have made fortunes over the last decade
to slake China’s thirst for raw industrial metals.

But in the future their profits could be hit by the Middle
Kingdom recycling ever-greater quantities of its own ferrous scrap to meet
industrial demand and, more importantly, cut dangerous pollution levels.

It is an interesting time to be a scrap dealer in China. The
market for recycled metal in the world’s second-largest economy is booming.
Demand for steel scrap for smelting into new material in China surged by almost
40% in the first nine months of 2018 to around 150 million mt, according to the
International Recycling Bureau’s latest figures.

Stricter rules to reduce emissions, trade tariff wars on the
import of waste metals from the US and the rise of China’s

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India is too important for oil titan Saudi to ignore

March 6, 2019

Commodities markets
expected the worst last week when tensions between India and Pakistan erupted
in a blaze of dogfighting jets in the skies over Kashmir.

A full-blown conflict between these old adversaries would be hard for resource producers, especially Saudi Arabia, to shrug off.

That is why
the Middle East’s biggest oil producing superpower was among the first to
despatch its top diplomats to Islamabad to defuse the situation. Minister of
State for Foreign Affairs, Adel Jubeir, was hastily sent with a letter addressed
to Pakistan’s leadership from his master, the Crown Prince Mohammed bin Salman.

symbolism of the message sent directly from the heir to the Saudi throne was
clear: Both sides – armed to the teeth with nuclear arsenals – must pull back
from the

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Russia’s OPEC alliance brings risks and rewards for Putin

February 18, 2019

OPEC still needs Russia to prop up oil markets, but the arguments for an even closer relationship with the cartel are weakening.
The Kremlin’s two-year-long alliance with the 14-member group has been useful up to a point. On the one hand, oil diplomacy has helped to bolster President Vladimir Putin’s growing regional ambitions in the wider Middle East. On the other, Russia’s economy has also benefited from higher prices buffing up Putin’s financial credentials and popularity at home.
Russia’s oil minister and Putin loyalist Alexander Novak is an advocate of the OPEC deal. He said this week oil prices would have dropped to levels below the $27/barrel recorded in 2016 without his country’s commitment to the group’s cuts and pledged his ongoing support for cooperation on supply. It’s a view

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King coal retreats in Europe, but still powers global growth

February 12, 2019

Coal is having a bad time in Europe. Germany – the world’s fourth largest economy – has said it will phase out coal-fired power generation by 2038 while in the UK, the closure of another large coal plant was announced.
Despite these setbacks, the fuel of the industrial revolution still has a vital role to play powering global growth in the future.
German power plant operators have until next year to outline plans to replace lignite – often referred to as “brown coal” – as an electricity generating fuel. Last year, coal and lignite-fired power stations met 35% of German electricity demand, equivalent to generating over 200 TWh of power.
The question is whether Germany – Europe’s biggest manufacturing nation – can remain competitive without cheap coal to generate power, especially in its

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Maduro’s squandering of Venezuela’s oil wealth is a tragedy

February 6, 2019

Venezuela should be a global oil-exporting superpower. Instead, the Marxist junta ruling the country teeters on the brink of complete economic collapse, with hyperinflation reminiscent of Weimar Germany and the chances of a political coup d’état in Caracas rising every day.
Despite its enfeebled state, Venezuela punches above its weight in oil markets. Uncertainty over its supply has helped to push up prices by almost 20% since the start of the year. That’s because many refineries in Texas and Louisiana – America’s fuel-producing engine – are configured to process Venezuela’s heavy blend of crude.
The country supplies about 50% of the oil used by the southern states’ plants dotted around the Gulf of Mexico. Finding suitable alternatives at short notice won’t be easy.
“Crude oil production

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Hitachi’s U-turn on UK nuclear plant could be a blessing in disguise

January 21, 2019

Hitachi’s decision to down tools on its proposed £16 billion ($20.6 billion) nuclear project in Wales, announced on January 17, could be a blessing in disguise for British consumers.
Instead of further subsidizing a globally declining industry, the government has simpler alternatives to ensure long-term energy security and affordable electricity prices for all. Natural gas, more renewables, storage and demand response are cost-efficient solutions with significantly lower risk than bankrolling the potentially ruinous cost of atomic fission.
The suspended project was to be built at Wylfa Newydd on the Welsh coast by the Japanese industrial giant and scheduled to be operational by 2027. Designed to produce 2.7 GW of electricity, it would have generated more than enough power to meet the

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Geopolitical tremors mean a choppy outlook for oil in 2019

January 17, 2019

Get used to more scary oil market volatility in 2019. This is the message coming from leading industry strategists and forecasters after a bruising end to last year, when Brent crude dipped below $50/b.
Although the benchmark has recovered along with major global stock markets, forecasters are concerned about the prospects of a sustained rebound. Unpredictable geopolitical upheavals like Brexit and US President Donald Trump’s trade wars are expected to weigh more heavily on sentiment than the fundamentals of supply and demand.
“One of the key lessons learned in 2018, painfully by some, is that market sentiment can shift violently without much change in fundamentals, requiring a steady, holistic perspective,” said Chris Midgley, global head of analytics, S&P Global Platts. “It is clear that

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Aramco’s IPO looks believable again after Saudi speaks up about reserves

January 14, 2019

Saudi Arabia has finally silenced its peak oil critics and simultaneously revived interest in its stalled $2 trillion plan to IPO state-owned producer Aramco.
The kingdom revealed last week it has enough crude to pump at current rates for at least another 70 years. At the end of 2017, Saudi oil reserves stood at an eye-watering 268.5 billion barrels, up from previous estimates of 266.4 billion. By comparison, the UK’s remaining cache of commercially retrievable oil under the seabed of the North Sea could be almost completely drained in a couple of decades.
The updated figures were no surprise for many experts. BP’s highly respected Statistical Review of World Energy lists Saudi oil reserves at just over 266 billion barrels and Rystad Energy estimates that 276 billion barrels remain under

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Saudi Arabia’s spending addiction is bad for oil markets

January 7, 2019

Saudi Arabia cannot continue living beyond its means indefinitely.
The kingdom is projecting another hefty budget deficit this year after crude prices plummeted by about than 40% since last October. Until the Arabian petrodollar states learn to tighten their belts, oil consumers will remain vulnerable to their economic mismanagement.
Saudi Arabia is doubling down on domestic spending despite falling oil revenues. Amid a volatile start to 2019 for crude markets, Riyadh is persisting with a risky economic strategy aimed at appeasing an anxious population. Success depends on reversing the slump in oil prices.
Riyadh’s budget for 2019 gives the impression of a country in denial. Spending will increase 7% to a record 1.1 trillion riyals ($350 billion), while total government revenues are

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Politicians could face backlash when IMO 2020 effects hit consumers

December 17, 2018

If the threat of higher diesel taxes was enough to cause riots on the streets of Paris, then the impact of an obscure new rule forcing shipping companies to use cleaner fuels in commercial vessels has the potential to turn the “gilets jaunes” movement apoplectic with rage unless policymakers wake up to the danger.
In just over a year, the International Maritime Organization, based in London on the banks of the Thames, will introduce radical new guidelines forcing shippers around the world to stop using dirty fuel oil and instead shift to low-sulfur marine diesel to help clean up the environment. However, the impact of the change will reverberate far beyond the world’s merchant fleets on the high seas.
Demand for transport diesel is expected to surge as a consequence of the rules known as

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Qatar’s OPEC exit could backfire on LNG superpower

December 10, 2018

Qatar’s reasons for exiting OPEC look muddled. The tiny Persian Gulf sheikhdom says it wants to concentrate on building on its position as the world’s biggest exporter of liquefied natural gas (LNG) instead of being a minor player in an oil cartel dominated by Saudi Arabia. Aside from saving on membership fees, leaving the group has few benefits and many risks.
Politics had nothing to do with the decision, which came as a complete surprise to OPEC and its allies, according to Qatar’s new energy minister Saad Al-Kaabi. At a press conference in Vienna on the sidelines of tense talks between the world’s most powerful oil men this week, he said Doha was a small oil producer and it had very little influence over OPEC’s decisions.
True, Qatar pumped daily just over 600,000 barrels of crude oil

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Brexit no deal is no worry for North Sea oil and UK energy sector

September 17, 2018

Economic warnings around a no-deal Brexit have reached fever pitch proportions. If Bank of England governor Mark Carney’s latest Doomsday portent comes to fruition, house prices will collapse and the streets will be choked by dole queues if the UK unceremoniously crashes out of the European Union. Certainly, the energy industry will also be affected; just don’t expect the petrol pumps to run dry, or the lights to go out on March 29 next year.
Based on the evidence at hand, the nation’s vital oil, gas and electricity industries can continue to prosper even in the hardest of hard Brexit scenarios. Firstly, losing jurisdiction over Britain’s oil reserves in the North Sea is theoretically bad for Europe because it pushes up the bloc’s dependence on imported crude from outside the region. The

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OPEC’s lost decade

September 10, 2018

Ten years ago the global financial crisis exploded on Wall Street. The most violent and sustained economic eruption in living memory left no industry unharmed, energy included. Oil producers are still grappling with the debris thrown up by its shockwaves.
The damage was made worse because few oil policy makers saw it coming. In the summer of 2008, crude was trading at an eye-watering record $147/b. By the first week of September, OPEC was compelled to cut its production to defend prices even though a barrel was still trading above $100. A few days later, Lehman Brothers collapsed and the rest, as they say, is ancient history.
“Oil prices, by the middle of the year, soared to heights that were not only unimagined but, as well, unsustainable,” OPEC’s then secretary general Abdalla Salem

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UK’s Africa push vital for energy mineral industries

September 3, 2018

UK Prime Minister Theresa May’s political judgement is often questioned, but her desire to boost Britain’s investment and trade with Africa makes perfect sense for commodities businesses. The continent’s resources will play an increasingly essential role in vital new industries such as the growth of electric vehicles (EVs) in passenger transport. Putting Britain at the front of the queue is vital.
Although May made scant reference to the importance of Africa’s vast resources in her Cape Town speech this week, securing access to the region’s rich seams of ore is vital. S&P Global Platts Analytics estimates there will be more than 300 million EVs in a global passenger fleet of 1.7 billion cars by 2040. A large proportion of the minerals and metals required to build this new climate-friendly

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Saudi Aramco IPO leaves few unscathed: Fuel for Thought

August 27, 2018

Saudi Aramco’s proposed initial public offering is in danger of turning into an embarrassment for all concerned, and the kingdom only has itself to blame.
Last week’s denial that the IPO of the world’s largest oil company had effectively been cancelled was the latest in a long list of rebuttals officials have been forced to roll out.
Repeated delays in the listing process — initially planned to go ahead this year — and confusion over how to achieve a desired $2 trillion valuation have sent out all the wrong signals to prospective international investors about Saudi Arabia’s reliability.
Crown Prince Mohammed bin Salman cannot entirely escape carrying some of the responsibility for the repeated delays to the proposed sell-off, which he announced with a great fanfare two years ago, shortly

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OPEC’s central bank problem

May 25, 2018

OPEC and the world’s most powerful central banks are on a collision course. Higher crude prices could push the custodians of the global financial system into tightening monetary policy quicker than expected to protect their economies from unchecked inflation. But, a kneejerk reaction could sow the seeds of economic slowdown, oil demand destruction and another price crash.
Take the problem facing Mark Carney, governor of the Bank of England. Lower-than-expected inflation figures released this week give the impression fears over the impact of higher energy costs in the world’s sixth-largest economy have been overblown. Since 2016, when oil prices dipped below $30/b, gasoline prices have jumped by almost 30% to an average around 127 pence/liter at the pumps.
And it’s not just vehicle fuel

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How soon will electric vehicles make a significant dent in oil demand?

February 19, 2018

Khalid Al-Falih may be right when he claims the oil industry has nothing to fear from electric vehicles (EVs).
Saudi Arabia’s oil minister unsurprisingly is a robust defender of the internal combustion engine (ICE). Contrary to the views of Tesla Inc.’s headline grabbing founder Elon Musk, the kingdom’s top energy official expects the conventional gasoline powered road vehicle to remain the bedrock of passenger road transport for generations to come.
“Today 6.5 billion people live in the developing world,” said Khalid Al-Falih, in his opening speech at the International Energy Forum in Riyadh last week. “This will rise to 8.5 billion by 2020. The reality is the dream for many of these individuals is to buy a motorbike, then a car. Given the issues of competitive products, these are

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Saudi’s Aramco IPO dream could create shale oil nightmare

January 29, 2018

Saudi Arabia’s dream of securing a $100bn windfall from the IPO of Aramco may be clouding its judgement.
The kingdom needs higher oil prices to entice international investors to buy a stake in the state-owned company, which supplies almost all its crude.
Using its OPEC clout to restrict global supplies and pump up the cost of its barrels makes the mega offering look more appealing but the move has also revived the kingdom’s biggest enemy in the form of US shale oil.
Oil prices have climbed 33pc to trade around $70 per barrel since the Organisation of the Petroleum Exporting Countries (OPEC), with the help of Russia, agreed in late 2016 to shave 1.8m barrels per day (bpd) of crude from world supplies.
That deal — brokered primarily by Riyadh — has now been extended for another year.

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Saudi Arabia gets inspiration from Alan Greenspan: Fuel for Thought

December 11, 2017

Alan Greenspan could be leaving an indelible mark on OPEC.
Saudi Arabia is drawing on the famous central banker’s thinking to frame its new oil alliance with major partners including Russia. Instead of an unstable and hastily brokered marriage of convenience that is fixated solely on boosting prices and market share, OPEC’s latest pact to extend production cuts for another year could have a more lasting outcome: the creation of a new central bank of crude.
The 91-year-old former Federal Reserve chairman believed in the power of markets to cure most of the world’s economic problems and masterminded a decade-long boom in the American economy. His success also created the current era of powerful central bankers running the global financial system. However, his disdain for regulation and

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