Crude Oil Resides In Biden's Mind -- Just As It Did In Obama's -- February 9, 2023

Yesterday in an e-mail to a reader I suggested that, politics aside, the State of the Union Address, for investors, telegraphs what will be important for policy makers in Washington, DC

Right on cue from Bloomberg: chart of the day, and op-ed:

Op-ed:

US President Joe Biden went off-script Tuesday night during his annual State of the Union address, acknowledging a reality that the White House had long sidestepped: Even under the most aggressive climate policy, demand for oil will remain strong for some time yet.

In off-the-cuff comments, Biden said the world would need oil for “at least another decade,” an admission that lends weight to a shift in focus among consuming nations: The high prices of last year and the redrawing of global crude flows have elevated energy security to a policy priority — at the cost of efforts to fight climate change.

Policymakers have long wrangled with an energy trilemma: how to ensure accessibility, affordability and sustainability. One of the three is often sidelined in favor of the others. For several years, protecting the environment has been paramount, with Biden pledging a transition away from oil. Now, security of supply and low prices have made a comeback, to the detriment of climate concerns.

Big Oil has, unsurprisingly, embraced the new approach. Exxon Mobil Corp. seized on the change in tack last week, saying it’s not a matter of choosing whether to satisfy demand or spearhead the energy transition; rather it’s “an ‘and’ equation, one in which we help meet the world’s energy needs and lead in reducing greenhouse-gas emissions.”

Energy security will likely remain front of mind this year, particularly at three key forums: the annual summits of the Group of Seven and Group of 20, and the United Nations’ COP28 climate conference. Japan, India and the United Arab Emirates will chair each of these meetings, respectively. All three will, according to diplomats, concentrate more on issues of accessibility and affordability than on sustainability, despite pressure from Europe.

Biden’s impromptu comments are a sure sign of what’s to come.

--Javier Blas, Bloomberg Opinion

 

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