top of page
synergy logo.png

Not a Comfortable 2021 So Far - Barış Sanlı


Yesterday, Israel news sources claimed a cyberattack on Iran’s Natanz nuclear facilities. Iran declared the event nuclear terrorism. Following the events, Houthis attacked Saudi oil facilities with limited damage. Oil prices barely moved positively because there are still cards in the deck.

During the Trump era, the US was against high prices and was also against low prices. Trump even pushed OPEC+ to reconcile after a spat between Muhammed bin Salman- MbS and Putin. The Biden era will be different. The first sign was the call between US Energy Secretary and Saudi Energy Minister. The emphasis was on the word “affordable.” After the OPEC+ decision, the US and Iran indirect talks have restarted. It is most likely planned weeks in advance. But the phone call may also include bits of these upcoming talks. There are still signs of the US position softening on Iran and Venezuela. This will put a cap on the price hikes.

There are also invisible yet effective parameters such as the exact volume of Chinese crude oil stocks. OPEC+ is targeting OECD stocks to balance the market. But China is all about storing commodities this year. You name it, and it is in their shopping list: crude oil, copper, nickel, cobalt, wheat, barley, corn... This creates enormous stress on world food prices. But also creates suspicions on the level of crude oil stocks around the world.

So far, Chinese Premier Li Keqing has listened to the entrepreneurs and has given the signal that China will further strengthen its control over raw materials. Chinese growth is not a green take-off but energy-intensive and gradual. Coal, raw materials, and other agricultural products and their security are even more essential now than before. When you consider the Chinese diplomatic spat with other countries, very few countries remained spared from Chinese criticisms.

If you are one of these “in net-zero, we believe” kind of person, the net and zero part of this belief system is highly eroded by finance communities’ abracadabra accounting practices. “Avoided emissions” became a life jacket for most industries, and lots of them claiming their net-zero achievements. However, things are getting messier in detail. This is a major problem, which may end up with all companies being net-zero and increasing emissions.

One fundamental problem is the split between the communities. There are a group of people trying to save the world, and there is an increasing number of people trying to survive. The decrease in middle-income groups is a wake-up call for everyone, especially degrowthism. The rise in food prices is worrisome. On the one hand, you have fewer jobs, more poverty. On the other hand, you have booming food inflation and tax regimes.


China and the US are expected to continue their growth trajectory. At the same time, Europe may be a laggard. Germany may end up closing for another number of weeks. The vaccination speed is one parameter, but the population's minimum share to be vaccinated is another important point.

In this digital age, measles has been resurrected due to conspiracy theories spread over the digital platforms. More parents refrain from vaccinating their toddlers. When it comes to covid19, the success of US vaccination may need more time and people. If an important share of adults rejects inoculations, herd immunity may never happen. In addition to that, Ugur Sahin, founder of BioNTech, believes there may be third doses and more doses for every 12-18 months. This thing will not disappear anytime soon.


So the reference scenario becomes the Covid19 to last until 2022-2023. The regular outbreaks may prolong energy demand stagnation in emerging countries. Probably we will have five months of higher activity and five months of covid related restricted activity periods. Inflation is not a good thing for the already punched-down middle class. US looks like trying to balance OPEC+ decisions with more oil supply coming out of sanctions. The lower oil prices are already affecting Middle Eastern countries.

The picture does not look bright. But the digital transformation that has been accelerated in the past couple of months may further speed up. Post Ramadan period in the Middle East has to be watched carefully. Drone-based attacks on Saudi Arabia will probably evolve into the next stage. I may call 75 $/barrel as the July-August price for oil, but the Biden administration may open Iran and Venezuela's gates and let it stay below 45-55$/barrel. I bet on neither. However, one question remains open. They were the faithful consumers of energy products and the source of demand growth. Who will save the middle class from the extended crisis?


Commentaires


bottom of page