President Vladimir Putin

President Vladimir Putin  © Getty Images

Twenty years ago, a small group of Russian businessmen saved the country from a return to communism. Boris Yeltsin, physically and politically weak, was close to being beaten in the presidential election by Gennady Zyuganov. In the first ballot, Yeltsin led by just 3 per cent. The money and organisation the oligarchs brought to the party put him more than 13 points ahead in the second and decisive vote. Now, in very different circumstances, the oligarchs may need to intervene again.

Russia is in a parlous state. Real incomes have fallen by 10 per cent in just a year. The rouble depreciated 37 per cent and in real terms gross domestic product fell 3.7 per cent, according to World Bank figures. Household incomes and investment fell sharply. The trends have persisted into 2016. Forget the bluster of President Vladimir Putin and the military activities in Ukraine and Syria. What was once a superpower is now a country in decline. Read more

Khalid al-Falih, the new Saudi oil minister

Khalid al-Falih, the new Saudi oil minister  © Getty Images

Are we on the verge of a real upturn in oil prices? Over the last 10 days, the price has risen almost 20 per cent. Is the talk of a sustainable upturn and a return to the situation of two years ago when oil was over $100 serious, or is the story just a silly season invention at a time when most traders are on holiday?

There are three potential explanations for the rise.

First, something could have changed in the physical market where supply meets demand. That can be dismissed very quickly. Supply is up and demand is flat. Iraq, Russia and Saudi Arabia have all increased supply this year. Iraq in particular, despite the continuing conflict with Islamist militants in the north and west, has managed to reach record production levels of 4.5m barrels a day. US production is slightly down but across the world most producers are maximising output to maintain much-needed revenue flows. Read more

Opposition protestors in Caracas last month amid demands for a refrendum on removing President Nicolas Maduro from power

Opposition protestors in Caracas last month amid demands for a referendum on removing President Nicolas Maduro from power  © Getty Images

After years of decline, the situation in Venezuela is becoming desperate. Could the latest fall in the oil prices provide the tipping point that finally brings to an end the unhappy period of Marxist rule begun by Hugo Chavez in 1999?

In the last two months the oil price has fallen by 20 per cent, ending the hopes of producers around the world that the downward slide of the last two years is over and that prices will soon return to a level that they used to regard as “normal”. For many, the latest fall will be the last straw. Numerous companies have maintained their dividend payments through borrowing. With prices falling again that looks unsustainable. Many, including the state companies, also face hard investment decisions on projects that need higher prices to be viable. With capex requirements outstripping revenue and little prospect of raising more money through rights issues more projects will be postponed or abandonedRead more

Energy demand in China appears to have decoupled from GDP

Energy demand in China appears to have decoupled from GDP  © Getty Images

The changes taking place in the world energy market are not just a matter of oversupply or the unwillingness of Saudi Arabia to rein in production. Demand has stagnated and in some areas is falling. The fall is unexpected — all the standard projections still cheerfully predict ever rising demand driven by population growth and the spread of prosperity in emerging economies. That assumption, however, begins to look too simplistic. The reality is more complex and, for producers, much more challenging. Forget the old debate about peak oil. Now it seems we are approaching peak energy. Read more

Oil rigs left in the Cromarty Firth, Scotland  © Getty Images

Is the North Sea doomed to enter a period of terminal decline once the current set of field developments is completed? Or can strong leadership from the UK’s new Oil and Gas Authority and radical thinking take it into a successful fifth decade? The answer is unclear but should be a matter of real concern to the UK Treasury and the Scottish government as well as to the companies directly involved and their staff.

Most of the facts are clear and undisputed.

For the moment production volumes are being sustained by virtue of projects sanctioned before oil prices started to fall in 2014. That should continue through to 2017. But the pipeline of activity beyond that is drying up. New exploration, in particular, has dwindled to minimal levels. It would be surprising if more than half a dozen exploration wells are drilled this year. Read more

Sampling crude oil at well operated by Venezuela's state-owned oil company PDVSA

Sampling crude oil at well operated by Venezuela's state-owned oil company PDVSA  © Getty Images

In strong contrast to the previous downturns in the energy market the sharp falls in prices seen over the last two years have not triggered a wave of restructuring in the industry. Merger and acquisitions activity has been minimal. But is that about to change? Could a wave of privatisation now reshape the business landscape?

Cyclical downturns in the oil and gas sector are relatively common and have occurred roughly once a decade since the 1980s. The response has traditionally followed a well-trodden path. Companies cut costs and postpone projects. They push for tax concessions and improved terms, while trying to maintain dividends. When that fails, heads roll and the stronger brethren take over the weak. Read more

Celebrations in Tahrir Square after the ousting of Egypt's President Hosni Mubarak in February 2011

Celebrations in Tahrir Square after the ousting of Egypt's President Hosni Mubarak in February 2011  © Getty Images

Remember the Arab Spring and the heady promise of freedom and peace in the Middle East? Many normally sensible observers were carried away by the excitement of the internet-led revolution in Tahrir Square and across the region. Now, a similarly happy transformation is promised in the energy market as the world moves away from oil, gas and coal. The transition is certainly coming but its implications will be as disruptive and dangerous as those of the Arab Spring. We should be prepared for the consequences rather than misled by wishful thinking.

The shift to a low-carbon energy system will be smooth, orderly and beneficial for most of the global economy: that is the view of a new set of papers from the Global Agenda on the Future of Oil and Gas – a group set up by the World Economic Forum, the organisers of Davos. Unfortunately, all the evidence so far points in the opposite direction. The shift may be beneficial in terms of the world’s environment, but economically and politically the result could be dramatically destructive. Read more

Traders follow the market at the Kuwaiti Stock Exchange

Traders follow the market at the Kuwaiti Stock Exchange  © Getty Images

Why did the oil price fall 70 per cent during the two years from the spring of 2014? And why, after falling from $115 a barrel to $30, has it now risen to something around $45 over the last two months? What has changed to explain these big shifts ? I was asked these questions by a friend last week and they are worth an answer.

One thing is clear. Oil demand did not fall by 60 or 70 per cent in that period and has not risen by 50 per cent in the last two months. Demand has continued to grow modestly by about 1m barrels a day each year. Oil supply has increased — by a little more than the growth in demand but certainly not 60 or 70 per cent. In the real energy economy things change much more slowly.

At one level, the imbalance between the growth of demand and the growth of demand explains the fall in prices. Led by extra supplies from Saudi Arabia and Russia and lower than expected demand from China, it explains the context of the fall, but not the scale or duration. Read more

Deputy crown prince Mohammed bin Salman answers questions in Riyadh on Vision 2030  © Getty Images

Saudi Arabia is in a mess. That conclusion seems to be common ground — the view of serious outside analysts and of the country’s own government. The only question is whether the problems can be corrected by shock treatment of the sort announced in Riyadh last week.

The immediate challenge is clear. Last year, revenue from oil exports fell by 23 per cent. That matters in a country that is 77 per cent dependent on oil income. Unemployment is officially 11.6 per cent, not counting the millions who hold non-jobs in and around the agencies of the state. In total, 70 per cent of Saudis work for the government. In the first half of last year, according to Mohammed al-Sheikh, the chief economic adviser to the all-powerful deputy crown prince, Mohammed bin Salman (known universally as MbS), the kingdom’s financial reserves were being drawn down at a rate that would have exhausted them by the end of 2017 — far earlier than had previously been estimated by outside authorities such as the International Monetary Fund. Read more

  © Getty Images

After two years of unrelenting gloom it is good to see that at least one part of the global energy business is booming. The price of lithium carbonate in China has risen by 253 per cent in the past year and there is intense takeover activity among the limited number of companies that control lithium production. Goldman Sachs has called lithium “the new gasoline”. Is the hype justified?

Lithium is a soft white metal that provides a small but for the moment essential element in battery technology. Production comes from mineral rock or from salt water, with supplies concentrated in Argentina, Australia, China, Chile and the US state of Nevada. That production is controlled by a very small number of companies, led by Albemarle, FMC and Chile’s Sociedad Quimica y Minera (SQM) in Chile. Between them they produced 90 per cent of total supplies outside China last year. Read more

The prospect of a partial freeze on oil production at current levels. Some upbeat numbers from China. A couple of days of rising prices on the market.

These signals are enough, it seems, to make some traders excited and to produce headlines announcing the end of the downturn and a turning point in the global commodities cycle. The reality, however, is more complicated. Read more

It is easy to say ‘be a vegan’ while you yourself tuck into a bacon sandwich, says Nick Butler Read more


The Saudi oil minister, Ali al-Naimi   © Getty Images

The kingdom’s not for turning. There will be no production cuts. Oil will continue to be produced at unwanted levels until other suppliers are forced out of the market.

That was the unequivocal message delivered at the IHS Cera conference in Houston two weeks ago by the Saudi oil minister, the 81-year-old Ali al-Naimi. Mr al-Naimi tried to claim that the US shale industry was not his particular target but that did not seem to convince those involved in a sector which is beginning to feel the real pain of $30 oil.

For the Saudis such pain, along with the even greater suffering being felt by their former allies such as Algeria and Venezuela, may appear to be a necessary cost in securing the kingdom’s goal — a secure oil market share for itself whatever happens to anyone else. On this view, all the others just have to learn the harsh realities of life. Think of it as the application of sharia law to the oil industry. Read more


Saudi oil minister Ali al-Naimi holds a press conference in Doha after meeting energy ministers from Russia, Qatar and Venezuela  © Getty Images

The Saudis blinked. The latest deal — an agreement with Russia to freeze oil output at January levels if they are joined by other large producers — won’t rebalance the oil market immediately and the early surge in prices last week was rather premature. But they blinked and that is all important. The myth of Saudi power is broken.

The real steps necessary to rebalance the market have yet to come. Saudi production must come down. Others may join in the process but an overall cut of 3m barrels a day is now necessary and most of that will have to come from Saudi Arabia. Stocks must be run off. That will take time. Iran must be welcomed back into the market. That process will be slow and even estimates of another 400,000 barrels a day during 2016 now look high. But they will come back and have to be accommodated. The interests of other Opec member states — such as Venezuela and Algeria — must be taken into account. The Saudi’s lack of respect for their fellow producers over the last year has shaken many traditional alliances. The kingdom does not have that many allies. Read more

A supply that is plentiful demands some fresh ideas from the industry Read more

Hungarian engineer Miklos Sziva checks t

  © Getty Images

Markets are inherently prone to volatility. Prices and valuations do not proceed in an orderly and linear fashion. Most important of all, they do not proceed in one direction for very long. The aim of any serious investment strategy should be to call the turning points and buy or sell accordingly. The energy market is at such a turning point and it will be fascinating to see who has the nerve and confidence to invest.

To say that this is a time to buy may sound odd following the criticism of Shell’s purchase of BG Group, which was reluctantly nodded through by fund managers last week. The issue is that the BG deal was based on prices roughly two and a half times above the current level and depends on an incredible forecast of future price trends. The result: a pyrrhic victory for Shell. That mistake, however, does not mean that other potential buyers of energy assets should be put off. At current prices, the time to buy is now. That applies to oil and gas but in different ways the same conclusion can be drawn for almost every part of the energy sector. Read more


President Vladimir Putin  © Getty Images

Of all those damaged by the oil price collapse, few are in a more difficult position than Russia. High prices have sustained the Russian economy since Vladimir Putin came to power in 1999. Hydrocarbons provide the overwhelming proportion of export revenue. Now something radical may be needed to avert economic collapse and political dissent.

Privatisation is back on the agenda of the international oil industry. Although the prospect of the Saudis selling a share in Aramco has been tantalisingly floated by the Saudi deputy crown prince Mohammed bin Salman in his interview with the Economist two weeks ago, there are other potential sales that are likely to be completed sooner. The most intriguing is the possibility that the Russian government will sell off another slice of its 69.5 per cent holding in Rosneft. Read more


  © Getty Images

Oil is now $30 a barrel. For investors and those dependent on investment income the question is whether the pain being suffered by the oil and gas producers is about to spread to the wider economy. Over the next month most of the companies involved in the sector will produce their annual results and announce their dividends. Investors will be watching anxiously for cuts. But the stark and rather shocking truth is that most companies in the oil and gas business are being forced to borrow to meet their payout commitments and that is a dangerous thing to do.

After a fall in prices of 70 per cent over the last 18 months there is a strong prima facie case for dividends to be reduced. That would painful for investors — not least the institutions that are relying on big oil for more than 23 per cent of total market yield. (Another 8.9 per cent of yield should have come from the mining sector if Glencore and Anglo hadn’t already cut their dividends.) But will it actually happen? Read more


The battle for Kirkuk, Iraq's oil capital  © Getty Images

It has always been hard to accept the argument that the series of wars in the Middle East since 2001 have been about oil. Afghanistan is not an oil state and most of the oil which will be produced from Iraq will end up in China and the Far East rather than in the US or Europe. On the other hand what is happening now in Syria and Northern Iraq shows that oil and power are inseparably linked. Read more

Ben van Beurden, Shell CEO  © Getty Images

Of course the answer is obvious. How could anyone be so foolish as to think that a company with earnings of $19bn in 2014, with reserves of 13bn barrels of oil and gas and with daily production of 3m barrels of oil and gas could possibly fail ? How could anyone think of bracketing Royal Dutch Shell with GEC, or ICI or Lehman Brothers — each in their time great companies but now reduced to dust. Perhaps it is impertinent to even ask the question. Surely Shell has survived for a century and more getting through wars, expropriation, an entanglement with Nazi Germany, the horrors of Nigeria and numerous other “crises”?

All true. Shell is undoubtedly one of the world’s great companies — decent, honest, civilised and a world leader in energy technology. But even those attributes do not provide complete protection in a world where the past is no guarantee of the future. Companies can have too much history and too great a sense of their own institutional importance. In a very competitive world no one is ever totally safe. Read more