Publications: Notes at the Margin

Commodity Supercycle 2: Too Little Copper and Lumber, Too Much Oil

The Energy Transition: A Green Guarantee of a Great Future for Oil?

Excess Returns to Storage for Gasoline: Little Hope for Margins after RVO Deduction


This Notes at the Margin covers three topics.


First, we look at the new commodity supercycle. Copper and lumber prices are at record levels due to the lack of productive capacity. Oil is different. Plenty of capacity exists, but market manipulators have idled a significant proportion of it. The dissimilar conditions for copper and lumber compared to oil dictate different outcomes.


Next, we turn to environmental zealotry. The International Energy Agency has shocked the world by recommending that most oil and gas capital expenditures end. This development has been followed by criticism of utilities planning to build new gas-fired generating capacity. That condemnation stems from the fact that the plants may be needed now but will not be necessary after 2035. If the zealots manage to stop this construction, we may see electricity price spikes like those experienced in Texas last February. We might also see a resurgence in fossil fuel investments by a public angered by such events.


Finally, we note that, based on excess returns to storage for gasoline, refining margins for August are unlikely to reward refiners that cannot generate renewable fuel credits. Indeed, the best margins may come from cutting gasoline production and generating additional renewable credits to sell.


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