Oil demand’s big picture on clean energy pushes, mergers : US Pioneer Global VC DIFCHQ Singapore Swiss-Riyadh Norway Our Mind

Massive mergers between 4 major oil companies have been announced in October alone — Chevron’s (CVX) proposed buyout of Hess (HES) for $53 billion, ExxonMobil’s (XOM) acquisition of Pioneer Natural Resources (PXD) for $59.5 billion. With the International Energy Agency (IEA) predicting that peak oil demand will hit in 2030, questions arise as to what will these companies do if international and domestic green energy initiatives to go carbon neutral are met.

Lipow Oil Associates President Andy Lipow joins Yahoo Finance to break down what these mergers will entail for these companies and their strategies going forward.

“The question is can clean energy be delivered to the consumer at a cost-effective price compared to fossil fuels?” Lipow asks. “Fossil fuels are going to continue to grow in demand in places like India, Southeast Asia, Latin America, or Africa that certainly don’t have the infrastructure… to support the rollout of electric vehicles in a grand way as they’re still wrestling with providing electricity for day-to-day consumer needs.”

Video Transcript

RACHELLE AKUFFO: When you talk about the future of fossil fuels, obviously you see a lot of companies also still making investments in clean and green energy then. So what does that mean for the future of fossil fuels, not just demand, but also on the supply side, and who’s really going to be buying this?

ANDY LIPOW: Well, the supply side is really the difficult thing to come up with. The most supply reserves are really in the Middle East or in Venezuela and several other countries where US oil majors and other integrated majors would rather not invest. While we go forward and we talk a lot about clean energy, the question is, can clean energy be delivered to the consumer at a cost effective price compared to fossil fuels?

Fossil fuels are going to continue to grow in demand in places like India, Southeast Asia, Latin America, or Africa that certainly don’t have the infrastructure, if you will, to support the rollout of electric vehicles in a grand way, as they’re still wrestling with providing electricity for day to day consumer needs in their homes.

RACHELLE AKUFFO: Indeed. I mean, and when we look at some of the volatility that we’ve seen most recently in oil, you know, started ticking up the beginning of the Russia-Ukraine crisis. Didn’t see as much of an impact following the Hamas-Israel conflict, though, but where do you see oil prices going from here and what’s going to be the next catalyst?

ANDY LIPOW: Well, I think that oil prices will continue to drift on up. I think you need $90 a barrel for WTI in order to encourage the next tranche of drilling, especially onshore as well as in the Gulf of Mexico. We’ve seen the drilling rig count come down over the last year. It’s down about 19%, which means the oil majors are trying to do more with less expenditures.

I think the catalyst for the next move up is actually twofold. One is the continued decline in worldwide inventories that’s being precipitated by the voluntary production cuts that we’re seeing out of Saudi Arabia and Russia. And, of course, geopolitically, the oil market is watching the events in the Middle East to see if Iran gets drawn into the conflict directly. That presages a potential shutdown of the Strait of Hormuz, where nearly 20% of the world’s oil transits on a daily basis.

RACHELLE AKUFFO: And, of course, one of the notable moves we saw this week, Warren Buffett upping his bet on Occidental Petroleum. What’s your take on that, especially given how energy has fared so far this year?

ANDY LIPOW: Well, certainly it’s a bet on price. Occidental is a huge producer here in the United States, and its stock price is really going to follow increases or decreases in crude oil and natural gas prices, and Warren Buffett is saying, you know, oil demand is going to continue into the foreseeable future, and while it might be declining here in the US or have been peaked, the world continues to require more and more oil, and you do see that in the short term with the International Energy Agency forecasts for increased demand this year and next year, as well as OPEC Plus’s forecast for increases in demand over the next few years.

https://finance.yahoo.com/video/oil-demands-big-picture-clean-164712350.html