The "Global Energy Crisis" is very real - July 20

[dan_s]

I cannot stress enough that we have an energy crisis on a global scale and there are no Quick Fixes. Our "Leaders" have been lying to us (maybe just because they are very dumb) about the dangers of Climate Change and how quickly we could move to renewable energy sources. The note below is from one of our VERY SMART members. The belief that Saudi Arabia can bail us out of this mess is just another lie.
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Dear Friends,

Attached is a very noteworthy article on Saudi Arabia's oil production capabilities, published today, from Javier Blas at Bloomberg.

Quote:
"In 2020, Riyadh instructed its state-owned oil giant Saudi Aramco to embark on a multiyear, multibillion-dollar program to boost its maximum production capacity to 13 million barrels by 2027, up from 12 million. The project is ongoing, with the first small additions coming online in 2024 followed by larger ones in the following three years."

The max, presumed level of production thus far has been ~11.3 mmbod, short term destocking from inventories, in theory, could raise supply to 12 mmbod for 2-3 months.

For the first time, Saudi Crown Prince Mohammed bin Salman has lifted the "thobe" (the ankle-length robe) and revealed what many of us have summarized or assumed, peak production was closer to 11 mmbod, NOT 12, NOT 13! The tide has gone out......they are still trying to get to 12 mmbod and even that is still years away.

For the foreseeable future, the new norm will be "Price Rationing Demand", at least until reliable and affordable forms of energy substitution are available, decades away, or alternatively less demand i.e. slower/lower economic activity.

All in all, considering the current geopolitical dynamics, ~ 8 years of under-investment in the O&G sector, ongoing capital avoidance/constraints, not to mention, a woefully inadequate renewable supply chain, it is, to put it mildly, a daunting situation.

The energy sector is still under-owned and only beginning to claw its way back to its former stature in the S&P 500. Also of note; without the Energy sector, S&P earnings growth would be negative y/y. A reversion to the mean is coming.