Publications: Notes at the Margin

Buyer Pressure: The End of the Asian Premium; Mandates Work (February 12, 2024)

 

This Notes at the Margin focuses on two issues. We begin by observing that Asian buyers are pressuring oil producers to lower prices. For example, Saudi Arabia responded by cutting prices for March deliveries to Asia rather than raising them as expected. The push for reduced prices will likely continue as India, according to the International Energy Agency, becomes the driving force in world oil consumption. India’s emergence is terrible news for oil producers because it has been bargaining to decrease prices for some time. The Middle East has borne the brunt of these actions since 2022.

 

Additional pressure can be expected going forward. New supplies from Canada and the United States, combined with the increased flow of Russian oil from the Baltic to India and China, will make the market more competitive. As a result, the Asian premium for oil seems to have ended, along with the market power of oil-exporting nations.

 

Second, we discuss transitions mandated by governments. As noted below, we are developing an extensive study of transitions, most of which did not involve energy. Some occurred quickly, some took decades, and some failed. Governments mandated a few. Surprisingly, these worked. History suggests that efforts to reduce fossil fuel use could succeed if governments back and sustain them.

 

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