World Risks Living With Oil Shortage
Warning from Occidental CEO
Warren Buffett’s favorite energy company as of late has been Occidental Petroleum. He has increased Berkshire Hathaway’s stake in the company with oil/gas operations in the US, Middle East, and other parts of the world to 21% and received regulatory approval to acquire up to 50%.
Buffett’s aggressive buying of Occidental comes as CEO Vicki Hollub warned that a massive gap between supply and demand for oil had been masked by historical releases of the strategic petroleum reserve under the Biden administration.
“The lack of supply will continue to manifest itself as China starts to open up from Covid,” Hollub explained in an interview on the sidelines of the Energy Intelligence Forum in London, Bloomberg quoted.
She warned the world is at risk of ‘living with a shortage for a while’ that will send prices higher, adding the lack of supply will become more evident in the first quarter of 2023.
To get an idea of Biden’s political emptying of the SPR … there are only 22 days of supply left.
Historic SPR releases come ahead of the Biden administration attempting to arrest gasoline pump prices, but a resurgence in crude and wholesale gasoline prices means their efforts are about to fail.
And if OPEC+ decides to slash production on Wednesday by 1-2 million barrels a day, it might force the administration to take more drastic measures to arrest prices. We explain more here: White House Panics As Gasoline Prices Rebound, Mulls Export Ban, Blasts OPEC+ “Hostile Acts.”
Occidental’s Hollub is correct about spare capacity woes that plague nearly all corners of the crude-producing world. That’s because of chronic under-investment in the oil sector for several years due to the bright idea of the people who run the world that thought a green transition would be seamless…
It’s not just Hollub warning about capacity issues and the inability to ramp up production. We pointed out in June that French President Emmanuel Macron claimed Saudi Arabia wouldn’t have the additional capacity within the coming six months.
Then in July, WSJ’s energy correspondent Summer Said reported the Saudis have a production capacity ceiling of 12 million barrels a day. That means the potential output increase is only 1.5 million barrels a day. And there isn’t much hope of raising above the 12 million mark anytime soon.
And remember an early August OPEC+ meeting that raised September output by only 100,000 barrels a day. The meeting noted “severely limited excess capacity” to boost supplies, which at the time was a slap in the face for Biden, who traveled to the Saudis to beg for higher production increase.
Then in late August, OPEC Secretary-General Haitham Al-Ghais sat down with Bloomberg Television and warned:
“We are running on thin ice, if I may use that term, because spare capacity is becoming scarce. The likelihood of a squeeze is there.”
It was only Tuesday when Saudi Aramco CEO Amin Nasser told the Energy Intelligence Forum in London, “when China opens up, [the] economy starts improving or the aviation industry starts asking for more jet fuel, you will erode this spare capacity.”
“And when you erode that spare capacity the world should be worried. There will be no space for any hiccup — any interruption, any unforeseen events anywhere around the world,” Nasser said.
So back to Occidental’s Hollub, the latest to warn about spare global oil production capacity issues due to years of underinvestment, which could increase crude prices. Perhaps the prospects of higher crude prices are why Buffett has fallen in love with Occidental.
(TLB) published this article from ZERO HEDGE as written and compiled by Tyler Durden
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