The oil reserves dwindle
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What is the main topic discussed in this episode?
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Pushkin.
You are not imagining it.
The war in Iran is still going on. The Strait of Hormuz is still mostly blocked and oil is still trading above $100 a barrel. This has now been going on for nearly three months. Nearly 80 countries have introduced some kind of emergency measures to protect their economies from higher energy prices. But the world is mostly merrily getting through its oil reserves. Today on the show, are we getting close to a tipping point? Do reserves hit a low point and send oil prices screaming higher? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist at FT Towers in London, where we have a long weekend ahead. And yes, people, the forecast is sunshine.
Sun's out, guns out. The big man, Rob Armstrong, is on his hole somewhere. But joining me in the studio in the depths of FT Towers, we have another big man, Malcolm Moore, the FT's energy editor. Regular listeners will recall that he knows which way is up on the energy beat. Malcolm, thank you for coming back on the show. We didn't put you off too much last time. Have you had any days off since we last did this at the start of April?
Um... What a question. This is not the time for days off.
Yeah, it's tough out there when the energy beat, right? So, look, you've been writing about this recently, this concept of a tipping point, because oil and gas reserves exist for a reason, right? It's for this sort of eventuality, right, where you can't get hold of the stuff and so you have some squirreled away, you know, down the back of the sofa kind of thing. How far through these reserves are we getting and how dangerous is that?
Well, I think I recall the last time I came on the show, I said that the energy market was, I think, tearing its hair out or exploding in some sort of confusion at the fact the rest of the world wasn't paying enough attention. I mean… Wherever we were last time, whichever bit of hyperbole we were at, we're further along that curve now. Cool. So, yes, I mean, it's worth saying there are two types of reserves, right? So companies have a lot of reserves.
What is the current state of oil reserves amid the Iran war?
They have three billion barrels more or less of oil in reserve. But it's not – I mean, we call them reserves. They're not really reserves necessarily. This is basically what the system, a lot of it, I mean, obviously there's a margin, but a lot of it is what the system needs to operate, right? So pipelines, in order to work, they have to have oil in them, right? And refineries, in order to make gasoline, they need to have crude oil waiting to be turned into gasoline. So all of this stuff is just, you know, it's...
It's kind of sloshing around the system.
It's working capital. It's not a stockpile. It's just what you need to do your business. And they're companies, right? So they don't want to hold stuff that they don't need.
How are countries responding to rising energy prices?
There's no profit in that. So they're required by governments to hold a certain amount. which is lucky because it's probably a little bit more than they would hold if it was up to them. But they don't have a huge margin. Now, the other type of reserve are the government reserves, the most famous of which is the U.S. Strategic Petroleum Reserve. And there's 1.2 billion barrels of that, of which we have used 400 million, or we will have used 400 million at some point over the summer. So that's good. But just very clearly, companies have got a lot, but a lot of it's being used. Governments have less, but all of that is available. Now, as the war continues, we're in the situation where we are using more than we have, right?
Demand has not really fallen.
Are we approaching a tipping point in oil reserves?
In fact, it's summer, so demand is going to go up, right?
Because we have, like, driving season in the States and because Europeans go on holiday on aeroplanes and, you know, and, and, and, and there's air con in Europe that suddenly needs to, like, really kick into gear.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–2:58
2
What is the current state of oil reserves amid the Iran war?
2:58–3:40
3
How are countries responding to rising energy prices?
3:40–4:26
4
Are we approaching a tipping point in oil reserves?
4:26–11:46
5
What types of oil reserves exist and how are they utilized?
11:46–18:17
6
How does demand affect oil reserves during summer?
18:17–22:26