The rising price of oil is once again fueling inflation and has become what market analysts consider the “new normal.” While oil majors are attempting to transition to greener alternatives, smaller firms with low-profile brands are still drilling. However, these firms claim that the uncertainty surrounding Britain’s tax policies is hindering their progress.
The price of a barrel of Brent crude oil, which serves as a global economic indicator, has reached its highest level in 10 months. Although the price is lower than it was a year ago, it has still pushed up the cost of fuel for transportation and heating due to the sliding value of sterling against the US dollar.
Market analysts believe that supply constraints implemented by Saudi Arabia and Russia will keep the oil price around $95, if not reaching the $100 mark. Rystad Energy, a consultancy, argues that this current price should be seen as the new normal, with oil demand continuing to grow throughout this decade.
The relationship between oil demand and economic growth has become more complex. While economic growth used to rely on oil as a fuel source, it has now become partly decoupled from energy consumption. It is now possible to achieve economic growth while using less energy more efficiently or transitioning to new energy sources.
The market for oil is intertwined with the politics and finance of achieving net-zero emissions. Countries and economies that rely on oil continue to face criticism for their environmental impact and are being pressured to transition to renewable energy sources. In the UK, windfall profits from oil and gas have led to higher tax rates and uncertainty over future tax policies.
The issue of oil and gas is likely to be a major point of contention in the upcoming Westminster election campaign, particularly for the Scottish National Party (SNP). The SNP is trying to strike a balance between continuing to extract oil and gas while minimizing emissions and leading the transition to renewable energy.
Meanwhile, the oil and gas industry is facing challenges in advertising its message. Influencers are hesitant to promote renewable energy for fear of being accused of greenwashing, while the industry itself wants to utilize media platforms to promote its arguments. Advertising agencies are being pressured to distance themselves from oil and gas clients.
While major oil brands like Shell and BP are working to avoid brand damage, smaller oil and gas companies are seizing opportunities in the market. These companies are less concerned about public perception and are receiving support from private equity firms and wealth funds.
Overall, the rising oil price has far-reaching consequences for the global economy and politics. It is exacerbating inflation, impacting tax policies, and driving a wedge between political parties. The complex relationship between oil demand, economic growth, and climate goals adds further layers of complexity to this issue.
– Source article: BBC News – “Rising oil price and the impact on inflation, investment and Scottish politics”
– Rystad Energy – market analysis on the new normal for oil demand and price.