Mar 20, 2019

Oil investor warns of "energy crisis" for U.S. producers

Data: Energy Information Administration; Chart: Cambridge Calculations, courtesy of Karl Schamotta

After we published our story last week on the booming prospects for American oil exploration in the next decade, Anas Alhajji, an oil industry adviser and longtime investor, directed Axios to an op-ed he'd written for the Financial Times arguing the converse.

Why it matters: Alhajji asserts that demand is growing substantially for heavy crude while supply is growing substantially for light crude from U.S. shale, creating a mismatch of supply and demand. The imbalance will choke off the growth of shale and the broader market, leading to an "energy crisis."

  • "We have two problems here," Alhajji tells Axios in a phone conversation. "If you look at U.S. shale forecasts, where will all this light, sweet crude go? We don’t have enough refining capacity worldwide to handle it."
  • "Secondly, we have a mismatch between the quality of oil produced and the products we get out of it."

What's happening: The demand for heavy crude is coming from diesel, Alhajji argues, as emerging countries grow their economies and need more fuel for trucks and heavy machinery. That demand will continue to grow. Further, he says, refiners in these countries (and in the U.S.) have invested heavily in refineries that use heavy crude.

What's also growing is U.S. shale production, which is expected to eclipse Russia in the next 5 years. But the demand for specialty products made from light crude such as plastics, including straws and bags, is falling. That will keep the demand for shale from keeping pace with the supply, Alhajji says.

  • "Price differentials are going to explode as international prices jump while shale oil prices fall to a price where producers can barely survive."

Go deeper

Coronavirus updates: Market ends worst week since financial crisis

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.

The stock market ended its worst week since the financial crisis, prompting the Fed to release a statement. Meanwhile, the WHO warned that countries are losing their chance to contain the novel coronavirus and raised its global risk assessment to "very high" Friday.

The big picture: COVID-19 has killed more than 2,860 people and infected more than 84,000 others in over 60 countries and territories outside the epicenter in mainland China. The number of new cases reported outside China now exceed those inside the country.

Go deeperArrowUpdated 10 hours ago - Health

California coronavirus: Latest case has no recent history of international travel

Gov. Gavin Newsom. Photo: Kevork Djansezian/Getty Images

A new case of the novel coronavirus in California was announced on Friday after Gov. Gavin Newsom said Thursday that 33 people had tested positive for the virus, noting the risk to the public remains low.

What's new: An adult woman with chronic health conditions in Santa Clara County who "did not recently travel overseas" or come into contact with anyone known to be ill was confirmed to have contracted the coronavirus on Friday by CDC and California Department of Public Health officials.

Go deeperArrowUpdated 10 hours ago - Health

Big video game conference delayed amid coronavirus concerns

Photo: GDC

Next month's Game Developers Conference in San Francisco became the latest tech event to be cancelled or postponed amid growing concerns over the spread of the novel coronavirus.

The big picture: A growing number of events are being scrapped, including Mobile World Congress and Facebook's F8 developer conference. Some, like the giant SXSW event in Austin, insist they are moving forward.