Publications: Notes at the Margin

Dangerous Forecasts and Alligators; Cushing Disruption (October 25, 2021)

 

This Notes at the Margin covers two topics. We focus primarily on the unrealistic, potentially harmful aspirations of those seeking to achieve zero net emissions of global warming gasses by 2050 by whatever means possible, even if it means destroying the global economy. We begin, though, with the disruption in the Cushing crude market.

 

Cushing Disruption

The commodity commentators are breathless. Backwardation in Cushing has increased dramatically, witnessed by a Bloomberg headline reading “U.S. Oil Hub Emptying to Levels Last Seen When Crude Cost $100.”[1] There is clearly a demand for light, distillate-rich crudes such as WTI in the Far East, almost certainly driven by the high natural gas prices in the region. That demand can be expected to push crude higher over the next few months. The increased demand for light crude and the higher price in the US will also hasten the next recession.

 

Draining the Swamp

Today, those managing the world economy, especially the individuals who seek meaningful and essential progress at the upcoming COP26 climate change conference in Glasgow, find themselves “up to their necks in alligators.” In terms of the saying, the efforts to drain the “fossil fuel swamp” may have been too aggressive. Yet, most decision-makers blindly think they can continue as if nothing is wrong. Catastrophe may await them and the world economy if they do not modify their actions.

 

 

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