These kinds of distortions take time to make their way through the market and will no doubt act as a tailwind behind oil prices in 2021 — we’ve already seen the price of a barrel of WTI surge 24 per cent so far this year. Of course, this week’s historic winter storms in Texas haven’t helped the situation for the U.S., either: whole segments of the industry, from pipelines to refineries, have been forced to shutter due to frozen equipment and rolling blackouts.
But this uncertainty is nothing compared to the lack of clarity on the demand-side. Given the tepid recovery in economic activity, U.S. demand for oil remains eight per cent below where it sat in February last year. We know that demand will eventually come back.
Longer term, there are significant headwinds to oil and gas from the shift towards renewables, but peak oil is likely still years away. Again, looking at EIA forecasts, U.S. production is expected to increase until 2030 and then plateau, rather than crater over the subsequent two decades.
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