Global oil market dynamics are shifting in favour of India’s energy plans
The global oil market has been roiled over the last several years. The demand shock during the pandemic, gradually evolving demand dynamics due to the electric vehicle (EV) transition, disruption of tanker movements following the Israel-Hamas war and economic sanctions against Russia, in interaction with supply responses to these events, have impacted international oil prices, trade flows and investments. Emerging clean energy technologies and more widespread efficiency policies and techniques are combining to slow down growth in oil demand.
First, a look at oil prices. They had averaged about $50 a barrel from 2015 to just before the pandemic that began in 2020. They plunged in the wake of global lockdowns to the teens, briefly even turning negative.
This paradoxical ‘negative price’ arose because supply gluts in certain places (like Cushing, Oklahoma, US) were so great that prices reflected an incentive for operators to pick up the oil at those locations and prevent the commodity from overflowing all available on-land and tanker storage capacity. Oil prices recovered to a more normal $50-60 going into 2022, when the Ukrainian war and resulting economic sanctions against Russia caused prices to a jump to $120 a barrel and settle down at an average of about $80, which is roughly where they are today. There appears to be a $15-20 per barrel uncertainty premium baked into the price of oil.
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