One of the many lessons to be learnt from the dramatic developments in the world energy market over the past six months is that outcomes are driven primarily by economics – often at the micro level. Another is the extent to which the market, in its rough and ready way, is linked globally and across the range of fuels. In the oil market, for example, a mild downturn in China upset expectations and started to pull down oil prices across the world because China has been the main engine of demand growth. Once the fall began, it turned out that no one had the power to call a halt. The result has been a fall beyond all expectations, with consequences across the world – from Libya to Angola, from Russia to Mexico and Venezuela. In the coal market, prices fell globally because shale gas was pushing coal out of the US power sector and because of Chinese import tariffs. Politicians in one country or another can try to cut themselves off from the underlying economics, but they rarely succeed for long. The economic impacts are not limited to the oil and coal markets. A set of changes beginning in the US is set to transform the global petrochemical business. A surplus of ethane, driven by shale gas development, is undermining the status quo. Read more
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