OMG where’s my SWF?

I’m not going to write anything original here; but every so often I hear cheap-shot comments about the Nigerian (and more rarely the Angolan) Sovereign Wealth Funds.  

Nigeria has a $1.4 bn fund where as Angola has some $5 bn.  Sounds like a lot of money until you compare to peers:  Norway has about $890 bn, Kuwait $600 bn etc.  But before any jokes about African financial (mis)-management here is my list:

  • Norway:  $890 bn
  • Nigeria: $1.4 bn
  • UK,.. er,  well, lets see…. check down the back of the sofa… oh yes, now I remember – there is no UK SWF, despite 50 years of production from the UKCS, and some cumulative 26 bn bbls of oil and 14 bn boe of gas (data up to 2010

Singapore, with no oil wealth at all, and less than 100 years of existence has not one, but two SWFs, with a total of $540 bn, built whilst being a net importer of hydrocarbons

Clearly there has to have been a huge dividend to the UK in terms of infrastructure and services…. again, better check down the back of the sofa and see if we can find any evidence of this.  Nope. 

Apparently not – looks like it all went into the house price bubble…   hmm…

Wisdom of the Crowds

Probably the best news in the current oil price slump is that there is now almost a “consensus view” that we are in conspicuous over-supply.    

My previous posts (Sunset in the Desert and Oil’s Kodak Moment) have discussed my decade-scale view on the oil supply-demand balance.  This post considers the shorter-term view, measured in months and years.   The only guarantee in these musings is that I’ll be wrong.

So lets look for some Bright Spots – not easy with stock markets and commodities tanking all around.

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Oil’s “Kodak Moment”?

Calais – August 2015,  Eurotunnel Tesla super-charger station

As noted in previous posts, I believe the Oil and Gas industries are going to go through a fundamental change in the next decade.   This is a combination of environmental concern, social pressure etc, but fundamentally by technological innovation.  The driving force for the oil industry is the price of oil; this in turn is dictated (outside of various conspiracy theories) by supply and demand economics.  The key point here is that of the c. 93million barrels of oil used daily, only 1 or 2 million of those affect the price – these are the excess or missing barrels that flip us into glut or scarcity.

Of these c.93 million barrels, roughly half goes into vehicular transport – and the majority of that is cars (autos).  So if you remove just some of the demand from the equation, you could create over-supply.  As most readers will be aware, this is not what happened in 2014; that was a supply-side bust, driven (if you’ll excuse the pun) by the success of the US unconventional oil industry.  But in the near future, it may well also be demand driven.

Continue reading “Oil’s “Kodak Moment”?”