Publications: Notes at the Margin

Austerity and Oil; SAF Mandates (April 29, 2024)

 

The current forecasts of future global oil demand blissfully ignore the growing threat of excess government debt. The debt-to-GDP ratio for the United States has risen back to its World War II peak, and further increases are expected. Other major industrialized countries are also underpinning their economic growth with increased debt.

 

The continuation of this support is required to realize the growth assumptions underlying most oil market projections. Yet many nations are now turning away from increased deficit spending. Rising interest rates are a symptom of the altered attitude. Reality will eventually strike everywhere. Economic growth will decrease sharply, and global oil use will decline, surprising many oil analysts.

 

This week we begin by discussing the global deficit issue. We next analyze the implications of the new sustainable aviation fuel (SAF) mandates. The European Union and the United Kingdom plan to require significant SAF use. These standards may be eased, though, if supplies are inadequate.

 

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