Emphasising that geopolitical upheavals have been “normalised” in the oil industry, KPMG International’s Global Head for Energy, Natural Resources, and Chemicals (ENRC) Anish De said that “relatively stable” crude oil prices are a reflection of supply-side diversification.
Asked about the range bound rally in international crude oil prices despite escalating tensions in the Middle East, which accounts for a major share of global supply, De pointed out that the energy sector has adapted to geopolitical fluctuations.
“With the current oil supply levels, supply-side shocks—unless they are substantial—might have a different level of impact compared to the past. The dynamics of power control have evolved over time. It is a very different world of energy than it was a decade and a half ago,” De told businessline on the sidelines of EnRich 2024.
Even in 2008, oil prices shot up to $140 per barrel without any real practical reason. But (today) despite ongoing wars—significant ones—oil prices have remained relatively stable, he added.
Prices and geopolitics
De pointed out that the international market is witnessing crude oil supplies coming from non-OPEC countries, which has a bearing on prices.
“Its more about supply-side diversification than global demand. Global demand has been steady, but supply has become more diversified. We’re seeing non-OPEC supplies and renewables making incremental differences, and gas is becoming a larger part of the energy mix. So, overall, the energy supply base is more diverse now,” he added.
Brent prices on Tuesday evening were trading at $75.48 per barrel. Emkay Wealth Management in a commentary on Monday said that Brent crude will continue to trade in a broad range of $75-80 per barrel.
Crude prices are weak as fundamental factors do not support higher oil prices, there has not been any major attacks on the oilfields in Iran, OPEC, International Energy Agency (IEA), and the US EIA data indicate an oversupply of oil in the coming year, and lastly the demand from China for oil is weak.,” it added.
Clean energy financing
An issue closely associated with accelerating the transition towards clean energy technology products and services is the lack of financing options.
Asked about the financing scenario, De said “Collective resolve, as seen with initiatives like the Glasgow Finance for Net Zero (GFANZ), hasn’t delivered the results it was expected to. There was a lot of noise, but the outcome hasn’t been as impactful enough. Governments and industry are still struggling with taxonomy harmonisation. It was an issue at the last COP, and it continues to be one.”
Aligning on taxonomies—like setting standards—is a big challenge. On top of that, as technology evolves, the definitions for these taxonomies become tougher because rigid standards might exclude promising new technologies, he added.
“Another issue is the incentives for clean energy finance. Clean energy finance needs to be cheaper than alternative financing, but that’s not the case right now. We need more government incentives, like tax breaks, to make clean energy more viable,” De opined.
When asked about the solutions to fast track financing, he stressed that the need of the hour is stronger political will and not more brainstorming.
“I think the problems are well understood. If there is no political will, then the next step towards solving it won’t happen,” he added.