Rupee Rumble: India-Russia Oil Deals Remain in Currency Limbo
Oil transactions between India and Russia are not currently being conducted in rupees because negotiations are continuing. This was stated by Pankaj Jain, the Secretary of the Ministry of Petroleum and Natural Gas of India, during discussions at the ADIPEC oil and gas exhibition. He said that This topic is now being discussed between the two nations; the negotiations have not yet been completed. In response to a question from TASS on whether or not Indian currency (in the form of rupees) is being used to purchase oil from Russia, he stated that this is not the case. Jain further mentioned that India and Russia settle their oil deliveries with other currencies. However, he wanted to refrain from commenting on the amount of oil that India wants to buy from Russia in 2023 and stated that it is impossible to forecast how much oil India will buy because he does not buy oil. The spokesman of the Indian Ministry of Petroleum mentioned that the purchases were made by companies based in India. The information that huge sums of Indian rupees had been gathered in Russia due to India’s payment for Russian oil purchases in rupees was disproved in September by Pavan Kapoor, India’s Ambassador to Russia. He noted that this situation is explained by a trade imbalance between the two countries. Earlier, the Russian Ministry of Energy refuted the allegations made by economist Mikhail Zadornov, who stated that the rupees stored in accounts may be one of the causes of the ruble’s depreciation. The Russian Ministry of Energy said that the rupees held in accounts are not one of the reasons for the depreciation of the ruble. Because oil companies repatriate a significant portion of their foreign currency revenue, the Ministry of Energy informed TASS that the opinion that problems with rupee conversion are causing the weakening of the ruble’s exchange rate does not reflect the actual situation. Any delays are not systemic, according to the Ministry of Energy’s statement.
September diesel sales in India down 3%, petrol up 5.4%
Diesel sales in India fell 3 per cent in September as a receding monsoon continued to dampen demand and slowed industrial activity in some parts of the country, preliminary data of state-owned firms showed. While diesel sales by three state-owned fuel retailers fell year-on-year, petrol sales rose in September. Consumption of diesel, the most consumed fuel in the country — accounting for about two-fifths of the demand, fell to 5.81 million tonnes in September from 5.99 million tonnes demand in the same period a year ago. Demand dipped by over 5 per cent in the first half of September, and consumption picked up in the second half as rains receded. Month-on-month sales were up 2.5 per cent when compared to 5.67 million tonnes of diesel consumed in August. Lingering monsoon Diesel sales typically fall in monsoon months as rains lower demand in the agriculture sector, which uses the fuel for irrigation, harvesting and transportation. Also, rains slow vehicular movements. Consumption of diesel had soared 6.7 per cent and 9.3 per cent in April and May, respectively, as agriculture demand picked up and cars yanked up air-conditioning to beat the summer heat. It started to taper in the second half of June after the monsoon set in. Petrol sales were up 5.4 per cent to 2.8 million tonnes in September when compared to the same period last year. Consumption growth was almost flat in August. Sales in September were up 5.6 per cent month-on-month, the data showed. Strong economic activity Macroeconomic data suggests a broad-based expansion across all sub-sectors of the economy, with the services sector continuing to post robust growth across financial, real estate and government services. India’s economy has demonstrated robust resilience and is likely to have surpassed the performance of most major economies during the first half of 2023. Industry sources said with steady and healthy economic activity and the ongoing air travel recovery, India’s oil demand is projected to rise in the remainder of the year. Suppliers group OPEC sees India’s oil demand expanding on average by 2,20,000 barrels per day on the back of vigorous economic growth. Consumption of petrol during September was 19.3 per cent more than in the COVID-marred September 2021 and 30 per cent more than in pre-pandemic September 2019. Diesel consumption was up 19 per cent over September 2021 and 11.5 per cent compared to September 2019. With the continuing rise in passenger traffic at airports, jet fuel (ATF) demand rose 7.5 per cent to 5,96,500 tonnes during September against the same period last year.
The Geopolitical Forces Driving Today’s Oil Market
There are three key determinants of how high oil prices will go from here. First, whether it is in the financial interests of the key players who have been pushing them higher to keep doing so. Second, whether it is in their geopolitical interests to keep doing so. And third, what other oil market players negatively affected by rising oil prices can do to bring them lower again. The first determinant is that it remains absolutely in the financial interests of Saudi Arabia, Russia, and the rest of the OPEC+ cartel to keep oil prices going up – the higher the better. Over and above the nonsense about balancing oil markets, the real reason that Saudi Arabia has for driving oil prices higher is simply that it needs the money. The money from oil (and from its hydrocarbons sector more widely) is the foundation stone of all funding for the Saudi state and for the ongoing power of the Royal Family, as analyzed in full in my new book on the new global oil market order. It is used to effectively subsidize large swathes of the economy, without which employment would fall, taxes would rise, and the social benefits of housing, education, and health, would cease to function properly. This money is funneled not just directly into subsidies for these areas but also into major projects that have nothing to do with the oil sector from which the funds emanated. Examples of such projects include developing a US$5 billion ship repair and building complex on the East Coast, creating the King Abdullah University of Science and Technology, and the US$500 billion Neom project. Any failure to keep delivering on these massive socio-economic projects funded almost entirely from hydrocarbon revenues would dramatically increase the likelihood of the removal of the Royal Family, and they know it. Consequently, the official fiscal breakeven oil price of US$78 per barrel (pb) of Brent for Saudi Arabia is irrelevant. In practice – as the fiscal breakeven oil price is the minimum price per barrel that an oil-exporting country needs to meet its expected spending needs while balancing its official budget – its true fiscal breakeven oil price has no set limit. The same considerations apply to virtually all other members of the OPEC grouping of OPEC+. For the key player in the ‘+’ part of OPEC+, Russia, the same irrelevance applies to the official fiscal breakeven price. For around 20 years, it had a fiscal breakeven oil price of around US$40 pb. Following its invasion of Ukraine on 24 February 2022, this jumped to an official US$115 pb. Unofficially, though, as wars do not adhere to easily quantifiable and strictly adhered to budgets, the fiscal breakeven oil price is whatever President Vladimir Putin thinks it should be at any given moment. An additional element at play in Russia’s support for ever-higher oil prices is that it undercuts the oil prices offered by Saudi Arabia and other OPEC+ members with direct deals done with major buyers, such as China – so, again, the higher the oil price the better for it. Russia began to determinedly push Saudi Arabia and OPEC+ members into driving oil prices higher from the moment that a general US$60 pb oil price cap on Russian oil was introduced in December 2022. The higher OPEC+ members push the oil price, the higher Russia can secretly sell its oil above that US$60 pb cap. On the second determinant, though, there is a key geopolitical reason that such oil price rises cannot keep going on forever, and this is China – the core geopolitical ally of both Saudi Arabia and Russia. Part of the reason why China will not continue to support oil price rises from OPEC+ is that it is a net importer of oil, gas, and petrochemicals, so higher prices negatively affect its economy too. Even now, its recovery from three years of over-tightly managed Covid is in question, and continued rises in energy prices will not help this. Certainly, it enjoys deeply discounted oil from Russia and from several other OPEC+ members, including Iran, Iraq, and even Saudi Arabia from time to time, but there is a limit on how much more prices can be increased without China really beginning to feel the economic pinch, even with discounts applied. China, though, will also feel enormous economic fallout from higher energy prices indirectly through the effect they have on the economies of the West – and these remain its key export bloc. The U.S., even with elements of the ongoing Trade War still in place, accounts for over 16 percent of China’s export revenues on its own. According to a senior source in the European Union’s (E.U.) energy security complex, and another source in a similar role in the U.S., the economic damage to China – directly through its own energy imports and indirectly through damage to the economies of its key export markets in the West – would dangerously increase if the Brent oil price remained over US$90-95 pb beyond the end of this year. The third key determinant is that other oil market players do have options open to them to bring oil prices down again. Over and above the plans in place to bring Iran’s 3 million barrels per day (bpd) back into the oil market through a new version of the ‘nuclear deal’, other supply increases are also in the offing. According to the U.S. Energy Information Administration (EIA), combined non-OPEC producers are expected to increase production by 2.1 million bpd in 2023 and 1.2 million bpd in 2024. The agency expects U.S. oil production to exceed 12.9 million bpd of monthly crude production for the first time in late 2023 and expects output growth to continue into 2024 to put U.S. crude production at 13.09 million bpd. Other major non-OPEC increases are set to come from Brazil, Canada, Guyana, and Norway, according to the agency. The ongoing recalibration of demand towards gas is also likely to reduce
Biden Administration Plans Zero Offshore Oil And Gas Lease Sales For 2024
The Biden administration will hold no offshore oil and gas lease sales next year and bring the total for the next five-year period to a minimum, Reuters has reported, citing unnamed sources. This means there will be just three lease sales over the four years beginning in 2025, the report also said. Reuters noted that on average, since 1992, five-year lease sale plans have featured at least 11 lease sales, with most holding between 15 and 20. According to some of Reuters’ sources, the reduction in lease sales is linked to the Biden administration’s offshore wind expansion plans. “The administration heard from the offshore wind industry that they need the IRA leasing mandates to be fulfilled to enable the U.S. offshore wind energy to continue to grow,” one of the sources told Reuters. “The number of oil and gas lease sales will be the lowest in history and will enable the rapid expansion of the offshore wind industry,” the same source explained. The link between the two comes from a stipulation in the Inflation Reduction Act, which mandates first holding oil and gas lease sales before being able to hold offshore wind auctions. The information revealed by the Reuters sources is certain to prompt a reaction from the oil industry just weeks after another lease sale-related news made the headlines when a judge ordered the Interior Department to remove the limitations on the Gulf of Mexico acreage that was to be offered in a lease sale on September 27. The ruling came after the American Petroleum Institute, Chevron, and the state of Louisiana filed a lawsuit against the federal government for the reduction in the acreage to be offered in the lease sale. At the same time, environmentalists are also likely to be angered by the latest news as they insist no new lease sales are conducted at all, apparently regardless of what the law says.
Clean Hydrogen Dreams Delayed By Rising Costs
There is currently not enough funding and support for hydrogen projects to roll it out on the scale they require to achieve the net-zero scenario by 2050, according to several energy experts. The widespread rollout of clean hydrogen projects has been restricted due to the high costs involved with producing the clean energy source, which is much more expensive to make than dirtier forms of hydrogen derived from fossil fuels. In addition, while companies worldwide are showing increasing interest in green hydrogen, many are failing to get the government backing required to commence operations. Green hydrogen is being viewed as increasingly critical to the global green transition as it is a versatile energy carrier that can be used in a range of applications from heating to transportation fuel. It provides an alternative to natural gas and fossil fuel-derived fuels and can also be used to power cars and other forms of transport instead of electric batteries. The fuel is produced by using renewable energy sources to power electrolysis. There has been increasing interest in green hydrogen in recent years, with various regions of the world competing to gain sectoral dominance – from the Middle East to Europe. Last year, the Spanish energy firm Compañía Española de Petróleos (Cepsa) partnered with the Port of Rotterdam to establish “the first green hydrogen corridor between southern and northern Europe”. The aim is to develop a green hydrogen supply chain between two of Europe’s main ports – the Port of Algeciras in southern Spain and the Dutch Port of Rotterdam. Meanwhile, several energy companies are investing in developing green hydrogen projects in some of the world’s emerging economies to drive down costs. However, this month, a report from the International Energy Agency (IEA) suggested that rising costs and lagging policy support from governments are limiting clean hydrogen’s potential. There have been several announcements about the launch of green hydrogen projects around the globe over the last couple of years, but the report found that many are being significantly delayed due to a lack of policy government support. The executive director of the IEA, Fatih Birol, said the world had seen “incredible momentum” behind low-emission hydrogen projects in recent years “but a challenging economic environment will now test the resolve of hydrogen developers and policymakers to follow through on planned projects”. Hydrogen produced in a low-carbon process continues to account for less than 1 percent of the world’s total hydrogen production. This is perhaps surprising given the momentum in green hydrogen projects in recent years and the media attention given to the energy source. In addition, green hydrogen has been identified by the IEA and several other energy organisations as one of the most promising fuels for reducing emissions in hard-to-decarbonise industries, such as steel and chemicals. The report found that the annual production of low-carbon hydrogen, including that derived from using captured CO2 if all projects are realised could total 38 million tonnes by 2030. The pipeline includes 27 million tonnes from electrolysis and 10 million tonnes from carbon capture. However, this seems increasingly unlikely as a final investment decision has been made for just 4 percent of the projects. Projects have been further jeopardised by high energy prices, rising inflation and global supply chain disruptions owing to both the Covid pandemic and the Russian invasion of Ukraine. Adrian Odenweller, a scientist at the Potsdam Institute for Climate Impact Research, explained why it’s so difficult to predict the mid-term global hydrogen capacity. He stated, “The hydrogen market ramp-up is characterised by the specific challenge of scaling up supply, demand, and infrastructure at the same time. Our research shows that this leads to short-term scarcity and long-term uncertainty of green hydrogen.” While there are several challenges to ramping up clean hydrogen production, governments worldwide can help encourage private companies to invest in the energy source in a variety of ways. Firstly, the introduction of favourable policies for green hydrogen projects would help reduce the red tape involved with set-up. Secondly, governments should take the U.S. approach by providing climate legislation with financial incentives for companies investing in clean energy sources. And, thirdly, governments must work together to establish clear standards and regulations for hydrogen projects across different regions of the world to develop an international market. The IEA’s chief energy technology officer, Timur Gül, stated, “This is the critical decade to bring down the cost of low-emission hydrogen.” This can be done through greater investment in research and development around the globe to provide the innovations needed to drive down costs. This will also help to establish the market required to drive up both the supply and demand for clean hydrogen. However, without government support for these projects, this may not be achieved.
Will We See $100 Oil In October?
After rallying to more than $97 per barrel on Wednesday, Brent crude took a breather on Thursday as traders started to take profits and the macro-focus in the markets turned to rising interest rates. The bulls can thank a sustained fundamental tightening for helping offset concerns about a higher-for-longer rates cycle. Last week, the U.S. central bank left interest rates unchanged but bolstered its hawkish stance with a further rate increase projected by the end of the year. Higher interest rates have historically been bearish for oil prices because they usually translate to less demand for oil as activity declines with higher costs. Interestingly, commodity analysts at Standard Chartered have suggested that a hawkish Fed could turn out to be a blessing in disguise this time around since it’s likely to cause OPEC producers to be more cautious for longer. Meanwhile, the U.S. dollar has strengthened considerably over the past three months after the U.S. economy proved more resilient than expected thus fuelling appetite for American financial assets. StanChart has predicted a further 1.3 million barrels per day (mb/d) fall in global crude inventories in Q4, following 2.1mb/d of draws in Q3. The analysts have noted that while slow to join the rally, speculative funds have now moved to the long side of the oil futures market. StanChart’s proprietary crude oil money-manager positioning index is now at a 44-month high of +16.7. Even better for the bulls: the oil price rally still has legs to run. StanChart has launched SCORPIO (Standard Chartered Oil Research Price Indicator), a machine learning model for oil price forecasting. SCORPIO is a proprietary tree-based model designed to generate a forecast for Brent crude spot prices on a one-week timeframe using parameters such as U.S. fundamental data, positioning data, physical global oil stocks, refinery margins/product pricing, financial indicators, technical indicators and non-oil-specific indicators. SCORPIO has forecast a w/w price increase of USD 2.1/bbl for front-month Brent to settlement on 2 October. StanChart says the upward forecast would have been greater were it not for speculative positioning with the money-manager positioning index sewn as a pivot point indicator. SCORPIO also sees USD strength as weighing on the oil price rally. StanChart is not the only bull here. J. P. Morgan says it will stick to its strategy of “staying defensive and trimming portfolio duration.” JPM rates the Energy sector overweight despite a stronger dollar, a hawkish Fed and geopolitical developments and believes that the Fed will hold higher rates through Q3 2024. “In the current environment, the assumption is that having additional immaculate disinflation would allow rate cutting without having to have growth risk be the driver for the disinversion of the yield curve,’’ J.P. Morgan economists said in the report. Overall, Wall Street remains bullish on the energy sector despite oil stocks lagging oil prices FactSet has reported that overall, Wall Street has 11,062 ratings on stocks in the S&P 500, of which 54.4% are Buy ratings, 40.0% are Hold ratings, and 5.6% are Sell ratings. Interestingly, at the sector level, the Energy (64%) sector has the highest percentage of Buy ratings, while the Consumer Staples (45%) sector has the lowest percentage of Buy ratings. The majority of analysts expect oil prices to remain high or go even higher. “The energy stocks will obviously beat because of higher energy costs right now. The world cannot have a disruption in energy right now because the supply-demand imbalance in the world is very fragile,” Louis Navellier, chief investment officer at Navellier & Associates Inc., has said in a note. As long as Saudi Arabia and OPEC+ maintain production discipline and markets remain tight, oil prices might remain unfazed by a brawny dollar or a hawkish fed.
Aemetis Increases India Biodiesel Production To 60 Million Gallons
Aemetis Inc. (Aemetis), a renewable natural gas (RNG) and renewable fuels company focused on negative carbon intensity products, announced that the company’s Universal Biofuels subsidiary has completed an expansion of its India biodiesel plant annual production capacity to 60 million gallons (227 million liters) more than one year ahead of schedule, supplying the expanding demand for biodiesel by India government-owned oil marketing companies (OMCs). The Aemetis Five Year Plan describes an increase from 50 million gallons (189 million liters) per year to 100 million gallons (379 million liters) per year of biodiesel production capacity at the India plant to be completed by 2025. Additional capital projects to increase the production capacity to 80 million gallons (303 million liters) per year at the Kakinada, India-biodiesel plant are in process for completion in the first half of 2024, also ahead of schedule. “The market for biodiesel in India continues to expand as OMCs increase the number of blending locations and the percentage of biofuel blended into diesel,” said Sanjeev Gupta, president of Aemetis International. “The Kakinada plant has expanded production by completing upgrades to de-bottleneck the plant, and the next phase will add additional process equipment to increase capacity. When production capacity reaches 100 million gallons per year, the India business will be able to generate more than US$500 million per year of revenues.”
India withdraws new import duty on private-sector LPG importers as regional prices mount
Oil ministry officials confirmed the withdrawal when contacted by S&P Global Commodity Insights. The funds collected under the Agriculture Infrastructure and Development, or AIDC, cess are aimed at improving the agricultural sector and were passed by the parliament around end-June/early-July. But the private sector deemed it an additional levy and not a part of the government revenue program. The private sector made a representation to the government that the duty affects 100% of their import volume, but only 5% of the imports by national oil companies and public sector undertakings, and was, therefore, discriminatory, an industry source familiar with the matter said. A finance ministry amendment July 1, stated that “nothing contained in S.No 10AA shall apply to imports of Liquefied Propane and Liquefied Butane mixture, Liquefied Propane and Liquefied Butane by the Indian Oil Corp. Ltd., Hindustan Petroleum Corp. Ltd. or Bharat Petroleum Corp. Ltd. for supply to household domestic consumers or to Non-Domestic Exempted Category (NDEC) customers.” The AIDC cess was withdrawn officially via a Finance Ministry notification dated Aug. 31 and came into effect Sept. 1. “The withdrawal move has been a balancing act between the expectation of high global crude prices and ease in domestic inflation,” said an oil ministry official who declined to be identified. The full exemption of LPG, liquefied propane and liquefied butane would give relief to importers of these products, the official added. Analysts said the decision to exempt these imports from the AIDC would help cut the burden on importers and ensure that the cost implications of the farm cess were not passed on to consumers down the line. The farm cess, spread across 29 items, including gold, silver and imported apples, alcohol (except beer), was conceived to improve agricultural infrastructure, including facilities such as cold storage units, warehouses and market yards. This cess fund was crucial for raising farm production and ensuring better post-harvest management. “It’s difficult to say whether it (the withdrawal) was due to the representation by the private sector,” the source familiar with the matter said. “However, as the (Saudi) CPs started rising, the government removed the AIDC probably not to burden the end-industry too much.” Escalating prices Saudi Aramco set the October propane contract price at $600/mt, up $50/mt from the September term CP, and the October butane CP at $615/mt, up $55/mt on the month, the company said Sept. 28. The monthly increase was the third in a row after the drop in July CPs, underscoring strong heating demand ahead of the North Asian winter, healthy demand for cooking fuel in India and Indonesia for year-end holidays, and latent feedstock demand among Chinese propane dehydrogenation plants. FOB Middle East propane and butane premiums to the CPs were assessed as high as $43/mt in the past week, according to S&P Global data, as trading firms have also been bidding for evenly split cargoes, even as supply is limited by lagging spot offers from Aramco Trading Co. In the face of mounting regional prices, India on Aug. 29 slashed LPG prices by 18% for domestic households, in an attempt to curb food price-led inflation that hit its highest rate in 15 months in July. India has stopped subsidizing LPG usage for 230 million customers since June 2020 to help ease the subsidy burden on the budget, but gives Rupee 200 each via direct benefit transfer to some 95 million low income users .
What Russia’s Fuel Export Ban Means For The Markets
Russia’s temporary ban on diesel and gasoline exports—while intended to address domestic shortages and soaring prices—could exacerbate an already tight global diesel market and drive crude and middle distillate prices higher ahead of the winter. And its relaxation of the ban on low-grade diesel won’t stave off much tightness. Most analysts believe the ban will not last long as it would lead to stock builds in Russia, which lacks spare storage capacity. But many observers also believe that Russia is weaponizing energy supplies again, trying to roil central banks’ efforts to tame inflation ahead of yet another winter. The Ban At the end of last week, Russia surprised the markets by announcing a temporary ban on exports of gasoline and diesel to stabilize fuel prices on the domestic market amid soaring prices and shortages due to higher crude prices and a weak Russian ruble. Diesel and gasoline exports are now temporarily banned to all countries except to four former Soviet states—Belarus, Armenia, Kazakhstan, and Kyrgyzstan. The export restrictions don’t have an end date, so Moscow could decide at any time to lift the fuel export ban or amend it as it pleases. Earlier this week, Russia did tweak its export limitations on fuels, lifting the temporary ban on exports of low-quality diesel and marine fuel and allowing the export of fuel supplies that already have loading papers and are accepted for export to proceed. The key question is how long the diesel export ban will last. If it extends beyond October, it could threaten a more acute global middle distillate shortage, especially in Europe just ahead of the winter heating season when middle distillate demand typically rises. The Market Since the EU, the U.S., and other Western allies banned imports of Russian seaborne fuel in February, Moscow has exported its gasoline and diesel to Turkey, the Middle East, and South America. Those markets are now temporarily off limits for Russian diesel and gasoline. Saudi Arabia, for example, is thought to have been snapping up Russian diesel at knockdown prices and sending its own diesel to Europe. With a longer-than-expected ban on its diesel exports, Russia could indirectly further tighten the diesel markets in Europe and Asia. Before the Russian fuel export ban, refinery margins had already hit the highest level in eight months in August, as refiners were struggling to keep up with oil demand growth, especially for middle distillates, the International Energy Agency (IEA) said in its latest monthly report. It will take up to two weeks for the market to feel the impact of the Russian diesel export ban, Viktor Katona, lead analyst with Kpler, wrote in a Friday note cited by CNBC. But “By that point, however, the government might already annul this specific piece of legislation, as abruptly as it was published,” Katona noted. Most analysts concur that the export ban would be short-lived and as abruptly lifted as it was implemented with immediate effect last Thursday. “How severe of an impact the loss of Russian diesel has on the global market will really depend on how long the export ban is in place. Although, given the likely domestic stock build we will see as a result of the ban, we would not expect it to be prolonged,” Warren Patterson, Head of Commodities Strategy at ING, wrote on Friday. Also on Friday, industry consultants FGE noted that “A key point to remember is that the diesel ban cannot last long. Once domestic supplies are replenished, Russia will have to resume exports due to a lack of spare storage capacity.” If Russia doesn’t lift the diesel ban soon, refineries will be forced to shut down in the face of no storage capacity. Thus, the export limitations will backfire on Russia via higher pump prices and domestic fuel shortages—the very issues Moscow is trying to solve with the ban, according to FGE. Refinery shutdowns could also lead to lower crude oil production in Russia. “We expect Russian diesel exports to resume latest in two weeks, and likely earlier,” FGE said on Friday, adding that the gasoline ban could last longer than the diesel ban, but with a small impact on the wider gasoline market. JP Morgan and Citigroup also see a short-lived diesel ban in place. JP Morgan’s analysts see the diesel export restrictions lasting a “couple of weeks, until harvest concludes in October,” they said in a note carried by Bloomberg.
U.S. Oil And Gas Production Growth Accelerates Despite Higher Costs
Oil and gas production in the U.S. expanded at a faster pace during the third quarter of the year despite still rising costs, the latest Dallas Fed Energy Survey has shown. Costs have now been on the rise for 11 quarters in a row, the Dallas Fed said, with the situation particularly difficult for oilfield service providers. Even with rising costs, optimism in the industry increased over the third quarter, likely thanks to rising oil prices, which also probably motivated the increase in production. The optimism was evident in respondents’ input despite expectations of still higher costs next year. Speaking of prices, the respondents in the Dallas Fed survey forecast a WTI price of $87.91 per barrel on average for the final quarter of the year. This compares with an average price forecast of $77.48 in the previous quarter’s survey edition. Asked about what the effects of the energy transition would be on the industry, about a third of respondents said they expected the transition to push the price of oil higher. Another third predicted the transition will push the price of oil significantly higher. Just 9% expect the transition to make oil cheaper. These expectations suggest highly resilient oil demand in the face of EVs and other electrification efforts that are part of the transition push. Another interesting take from the survey concerned oil consumption now and in 2050. Some 28% of respondents saw oil consumption in 2050 slightly higher than current levels while 25% saw it as substantially higher. Another 25% saw 2050 oil consumption as slightly lower than current levels and only 8% expected it to be significantly lower than current levels. These expectations are particularly interesting in the context of recent reports from the International Energy Agency and other forecasters saying that peak oil demand will happen before 2030 as EVs displace internal combustion engine cars.