State and Future of Global Energy 2019
Webster University Geneva Annual Seminar, Co-organized with Argus Media
The fourth annual event on the “State and Future of Global Energy” was held at Webster University Geneva on 20 June 2019. The event was organized by Prof. Rouben Indjikian, lecturer in energy and commodities, with the support of David Fyfe, Chief Economist, Argus Media, one of the leading oil and other energy price reporting agencies. The event focused on the current state of energy, with an emphasis on price formation and the reporting on prices in energy markets. It was preceded by a podcast conducted by Prof. Indjikian interviewing David Fyfe (click here to follow the podcast). In the main event, they discussed topics such as price reporting agencies and state of energy markets, with an emphasis on the oil market as well as comparing main energy outlooks.
In his keynote presentation on price reporting and the state of markets and prices, David Fyfe first introduced the essence of price reporting and the role of Argus Media. This was followed by an assessment of current market trends. In particular, he stressed the role of independent price references produced by price reporting agencies (PRA) that everyone can agree upon, which brings transparency & price discovery to frequently opaque markets. The possibility to collect information online gives greater precision to this “just in time” information. After the global financial crisis of 2008 with an unprecedented spike and collapse of oil prices, the PRA were under international scrutiny by regulators, coordinated by International Organisation of Security Commissions (IOSCO). The crude oil prices based on principal benchmarks such as Brent and WTI are essential for crude oil market global price formation. Those benchmarks need liquidity to function and undistorted markets with multiple actors to determine price levels, adequate infrastructure including storage, etc. Changing the existing benchmarks and permitting them to evolve has been easier than developing the new ones.
The markets for crude oil and other energy, which are driven by global economic growth, are slowing down cyclically. The market itself is now different with a dramatically increased role for shale oil and the USA as leading oil producing country. This narrows the possibilities for supply management manoeuvring by OPEC and countries like Russia partnering with it. As the demand for oil is driven by economic activities and industrial output, it can be more heavily affected should a recession occur. In that respect, the impact of the US-China trade war and geopolitics of oil including Venezuela and Middle East, especially Iran sanctions and freedom of crude oil flows through Hormuz Strait, has been assessed. Overall, the year 2019 has been tightened by the global oil supply and demand in balance. For 2020, this balance can be heavily dependent on the demand for oil.
In the second presentation, Prof. Indjikian outlined the most important trends as presented in main energy outlooks, showing that consumption of energy in spite of an increase in energy efficiency, will still increase in absolute terms. The most important relative gains by 2040 will be attributed to renewables and natural gas. Developing countries will make up most of the increase in the world’s demand for energy. Oil production might collapse if no investment replaces the old traditional oil fields which are becoming depleted. However, oil and natural gas are still said to be tomorrow’s energies. Generally, the growth of primary energy consumption will drastically slow down by 2040. Renewable energies and innovation will become much more important in the future, but the production and consumption of oil and gas, and even coal are not to be underestimated. The final contradiction presented is how to guarantee a supply of energy, including hydrocarbons, while dealing with increasing demand and trying to decrease CO2 and other harmful emissions. The competition between energy sources is increasing, and the new industrial revolution impact on energy sector might be of paramount importance.
After the presentations of David Fyfe and Rouben Indjikian, participants raised interesting questions. The questions concerned possibilities for new benchmarks for example in China, competition between shale and traditional oil producers, difficulty of globally implementing prices for carbon, the feasibility of recycling carbon, future of nuclear power stations especially in India and China, new regulations regarding usage of more sustainable marine fuels, the ways in which coal could be cleaned, and others. The importance of statistical outlooks and reviews were highlighted, and it was stressed that the continuation of such discussions is quite important.
Those interested can find a podcast recorded before the event by David Fyfe and Rouben Indjikian on the Webster University Geneva Podcast site here: https://podcast.webster.ch/state-and-future-of-global-energy-2019-david-fyfe/