The Fuse’s goal since its launch in 2015 has been to increase the understanding of global oil markets, alternative transportation, and the geopolitics of energy, and stir thoughtful debate on these critical issues. In the past year, news surrounding energy security occurred at a dizzying pace, with the 2016 presidential election, major shifts in transportation amid the growth in autonomous vehicles, and OPEC cutting production the major highlights. We’ve published numerous stories, infographics, and videos, commenting on the major energy security issues of the day. While we take pride in all of our content, below are 10 standout pieces. Please enjoy, and thank you for reading The Fuse.
Leslie Hayward and Matt Piotrowski: OPEC, Far From Dead, Agrees To Major Cut, Sparks Market Rally
After discussing taking action all year in order to bump up prices and rebalance fundamentals, OPEC finally agreed on a production cut, its first in eight years, at the end of November, clearly the biggest oil market story of 2016. Reporting from Vienna, Hayward and Piotrowski analyze the details of the cut and highlight the major risks for the group and speculate on the market impacts. Importantly, the authors note one important point largely overlooked by market watchers and OPEC journalists: The deal reflects how the cartel still actively engages in undermining a free, fair, and transparent oil market.
Key Excerpt: The cartel began discussing capping or cutting output in February as prices fell into the $20 per barrel range and the global surplus kept growing, despite expectations to the contrary. Meetings in Doha in April and Vienna in June did not lead to agreements, but members have now put aside differences for the time being amid a collective interest to see higher prices, as their economies suffer from longer-than-expected price weakness.
Matthew M. Reed: OPEC Rivals Saudi Arabia and Iran Plan to Quit Oil Addictions
An extended period of low oil prices has spurred petro-states to rethink their dependence on oil. Saudi Arabia and Iran, fierce rivals, are taking different approaches to overhaul their economies. Reed breaks down the reforms taking place in both countries, looking at the challenges of Saudi Vision 2030 and the tensions surrounding the Resistance Economy in Iran. The success or setbacks of both countries in reforming their economies will have large consequences for the region and the global oil market.
Key Excerpt: Saudi Arabia and Iran want to quit their addiction to oil revenues while maintaining robust oil and gas sectors. Both recognize the dangers of runaway subsidies and wasteful consumption. In fact the Saudi plan for dialing back subsidies and offsetting these costs is remarkably similar to Iran’s program. Saudi Aramco doesn’t need foreign capital or technology to continue thriving and Riyadh sees foreign investment as absolutely necessary for diversifying away from oil. Tehran, by contrast, needs foreign investors to increase production and introduce enhanced oil recovery techniques.
With autonomous vehicles now in the news on a daily basis, there’s been growing skepticism that Americans will accept them once the technology is ready for widespread penetration. Peterson argues that U.S. consumers are in fact ready for self-driving cars and will embrace them whole-heartedly once they arrive. The list of benefits is long. The new technology will be as American as baseball and apple pie.
Key Excerpt: We tolerate this carnage because cars bring great utility and freedom. Self-driving vehicles deliver even greater utility by freeing driving time for other things—be it texting, working or just relaxing. Self-driving cars also deliver huge benefits to the disabled and the elderly who would otherwise lose their licenses. At the same time, self-driving cars remove much of the human error that contributes to the vast majority of injuries and deaths. Self-driving cars also deliver a number of broader social utilities. These range from far more efficient use of our present land and infrastructure to more overall productive lives. Americans have dreamed of driverless, horseless carriages since the ’30s, but their advent had to await the development of cheap and convenient computing power.
The release of the Panama Papers in April caused a major earthquake among the powerful elite throughout the world. The revelations were so stark that they led to the resignation of the prime minister of Iceland and embarrassment for the likes of then-PM of Britain, David Cameron, and soccer star Lionel Messi. In this article, Piotrowski focuses on the heavy corruption, malfeasance, and opaqueness in many petro states exposed in the Papers. Leaders in Saudi Arabia, Qatar, Iraq, Sudan, Russia and others have stashed assets overseas in order to avoid accountability and exploit loopholes for their own purposes.
Key Excerpt: The fact that the global elite bend the rules for their own gain is no surprise, nor is it all that shocking that leaders in petro states hold a large concentration of wealth, and seek to hide it from their own systems. However, the trove of specific names and data surrounding the dealings of the rich and power that has been thrown into the public eye should enable some movement towards greater global transparency and integrity.
In all the talk about the oil market, much of the focus tends to be on crude production levels, futures prices, and pipeline protests, but tanker traffic carrying the oil from point A to point B serves as a vital link in the global supply chain. The Suez Canal, a key chokepoint, received a good bit of attention this year as the Egyptian government raised tariffs on tankers moving through the artery in order to boost revenues for the ailing economy. Ward looks at the unintended consequences of this decision. In an attempt to avoid the high tariffs, many companies and shippers shunned the Canal and traveled around South Africa instead, further undermining the Egyptian economy.
Key Excerpt: The higher costs of using the Canal have in many ways also encouraged countries and companies to use other routes as a way of avoiding the extra shipping rates and costing involved. But shifting routes affects the speed of the journey. A tanker travelling from Iran to France takes approximately 19 days via the Suez Canal, whereas an alternate route going around Africa takes 34 days. The Suez route saves an enormous amount of time, meaning more trips can be made during a shorter timeframe. Recently, however, we have observed more and more tankers using this alternate chartered route.
Leslie Hayward: Will Electric Vehicles Upset Oil and Metal Markets?
As of now, electric vehicles remain only a niche market. But based on recent forecasts from a variety of reputable outlets, they will grow in popularity over the years. Hayward looks at how rising sales of EVs will impact oil and metals by discussing outlooks from Bloomberg New Energy Finance, Wood Mackenzie, and the IEA. While the disruption will take time, it’s clear that today’s oil and metals markets will eventually be turned upside down by alternative vehicles.
Key Excerpt: The impact of developments such as autonomous technology and shared-mobility business models will change how cars are owned and used in ways that can’t currently be projected. But the disproportionate impact that EVs are likely to have on copper versus oil markets is sure to be a dynamic to watch in the coming years, as the same number of electric cars that would displace 2-3 percent of the global oil market would boost the world’s copper demand by one-third.
Leslie Hayward and Matt Piotrowski: The Organization of Oil Trading Tweeters #OOTT Merges Powerful Data With a Culture Of Openness
A number of social media outlets are very powerful and have changed the way we communicate and look at the world. This is definitely the case with Twitter. A number of day traders have put together an influential hashtag (#OOTT) on the platform to openly share oil data that is pertinent for market players, analysts, and journalists. Hayward and Piotrowski talk to the founders and discuss the philosophy behind the group and why what they’re doing is groundbreaking. The hashtag has been a big hit, particularly its tanker tracking data, which is helpful in understanding OPEC action, global trade flows, and inventory changes.
Key Excerpt: Few industries are known to be more secretive than oil trading, in which the price and flows of vital hydrocarbons are defined by anonymous individuals with exclusive access to rumors and data. Although this portrait may still apply to many traders of physical oil volumes, or traders in hedge funds and other financial institutions, a new Twitter community is bucking the trend. A number of traders have come together under the hashtag #OOTT, the Organization of Oil Trading Tweeters, to share oil news, events, and a public data set of tanker traffic and global oil trade flows that rivals some of the best proprietary market analytics.
With consumers distracted constantly by phones, tables, and other gadgets, concentrating on driving while driving has become more difficult, and more dangerous. The consequences of this development are dire. The number of traffic deaths is rising and could continue to increase as driving becomes too tedious. Hayward looks at how autonomous vehicles, whose biggest promise is greater safety on the roads, can reverse this worrying trend.
Key Excerpt: As distracted driving accounts for an increasing number of accidents, the arrival of fully-autonomous vehicles can’t come soon enough. But there’s a catch: Improper deployment of partially-self-driving cars to motorists who are already less focused on the road could have disastrous consequences.
Ecuador, one of OPEC’s smallest producers, has dealt with years a stagnant output. This has led to the government needing to spur production in any area it can, including environmentally sensitive areas such as the Amazonian rainforest. Ruiz details how the government’s decision to increase output in the Yasuní-Ishpingo Tambococha Tiputini (ITT) block will be a big sources of revenue for the country in the next decade but has set off a firestorm among indigenous rights groups.
Key Excerpt: Now under the strain of low resource revenues, sluggish global oil demand growth, a strong U.S. dollar, and the ongoing rebuilding efforts following a 7.8-magnitude earthquake that struck Quito earlier this year, Ecuador’s government needs money to fund big-ticket energy projects. This has led the government to introduce new taxes and steep cuts to capital expenditures, amounting to $6 billion, or 6 percent of gross domestic product. Although opening the Yasuní-ITT area will undoubtedly increase the country’s total oil production, it may do little to improve overall economic conditions in the short-term, and may even make it more dependent on its bilateral relationship with China in the long term as the country deepens ties with its transpacific trade partner.
Matt Piotrowski: Obama: The Accidental Energy Security President
All presidents going back to Richard Nixon in the 1970s have made energy security a priority in both their economic and foreign policy agendas. But they’ve all had only modest success—until Obama. Under Obama, the U.S. significantly sliced its dependence on foreign crude and saw pump prices take a major plunge. How much did Obama affect these major shifts? Not all that much. Piotrowski points out that the 44th president deserves credit for tightening fuel-efficiency regulations and promoting alternative vehicles, but the turnaround in energy security fortunes was mostly the result of sharp increases in production on private lands and a decline in demand from the aftershocks of the Financial Crisis.
Key Excerpt: Obama saw overall energy security improve markedly during his presidency. Crude imports have fallen dramatically during his time in office, demand for oil has taken a hit, and the country’s trade balance has improved significantly due largely to a decrease in imports and sharp uptick in exports of refined petroleum products. His legacy is, however, complicated, and full of irony and contradictions. Obama has been seen as an anti-oil politician, yet domestic production grew at its fastest rate ever under his watch.