Is our great Kiwi summer at risk… again? ☀️ The summer roadie is about as Kiwi as it gets - from festivals, camping trips, to long days out at the beach, hitting the road to enjoy our great outdoors is just what we do. But if crude oil prices climb to the heady highs of 2022, when they exceeded US$110 a barrel on commonly cited oil price benchmarks the West Texas Intermediate (WTI), Brent and Dubai - or worse still, to the mid-2008 oil prices, when they temporarily soared above US$140 a barrel - then, according to Stuff, many Kiwis may face tough choices this summer.
Or, we’ll all simply turn up the aircon as we queue at one of Gaspy’s stations offering the cheapest petrol prices. ⛽🚗🛻🚙
Global oil prices have soared since June, reaching a 10-month high. Rising oil prices followed the Opec+ June announcement that their member oil-producing countries - which includes Saudi Arabia and Russia and accounts for 40% of the world’s crude oil - had agreed to combat global oversupply risk by reducing their output, possibly into 2024. Then early this September, Saudi Arabia and Russia confirmed that they would continue to voluntarily cut oil production, reducing daily global supply by around 1.3 million barrels.
A collective sigh of relief. The news shot the WTI, Brent and Dubai prices past US$90 a barrel last week, with Brent climbing above US$93 in a high not seen since November 2022 - hikes of more than 30% since June, according to Bloomberg. But oil barrel prices have dropped across the board since their 18 September peak, so far avoiding a return to the ominous US$100+ per barrel price point.
Has big oil got Aotearoa over a barrel? 🛢️
Will we see July 2022 come back to haunt us? 👻 As we kicked off the third quarter last year, Kiwis were paying up to $3.36 NZD at the pump. Dubai is New Zealand’s primary oil source, and last week as the Dubai benchmark crept past US$90 a barrel, our petrol prices kicked into third gear. For 91 octane, many stations’ price at the pump jumped past $3 NZD a litre, up to $3.25 NZD in some centres. And Gaspy’s nationwide user-generated real-time data showed that Tasman Fuels Omarama in Otago was the cheapest place to buy fuel, at just $2.74 NZD per litre.
What do oil barrel price surges mean for stocks?
Oil demand is not showing any signs of slowing. According to the International Energy Agency’s (IEA) September Oil Market Report, oil demand is being ‘led by resurgent Chinese consumption, jet fuel and petrochemical feedstocks’. And last week, analysts at Goldman Sachs raised their 12-month forecast for Brent oil to creep past that US$100+ a barrel mark.
Oil stocks are typically considered volatile, and energy companies make up less than 4% of the whole S&P 500. But with rising demand and many in the oil and energy sector expanding into renewable energy, what’s happened with oil stocks so far this year?
US share market oil and gas companies and ETFs in 2023:
- Chevron (CVX) with market cap of US$320.904 billion has seen their stock climb nearly 12% since June 2023, but their year-to-date (YTD) stock is down 3.1% since 3 January 2023
- Coterra Energy (CTRA) holds a market cap of US$20.084 billion and their stocks have grown 14.3% since June, with their YTD stock up 14.5%
- ConocoPhillips (COP) has a US$144.753 billion market cap and their stock has climbed nearly 22% since June, with their YTD stock up nearly 7%
- Devon Energy (DVN), with market cap of US$30.417 billion, has seen growth of 3.28% since June, but their YTD stock has fallen 18.1%
- Exxon Mobil (XOM), holding a US$462.294 billion market cap, has seen stock increases of 13.8% since June, and their YTD stock travelling up 9.14%
- iShares US Energy ETF (IYE) net assets sit at US$1.35 billion and their stock has grown 18.12% since June but is only 6.8% up YTD
- Pioneer Natural Resources (PXD) has a market cap of US$52.412 billion and has experienced 13% growth since June, with YTD stock up just 2.4%
- Shell (SHEL) holds a US$214.712 billion market cap and has seen growth of 15.55% since June, with stock up nearly 16% YTD
- SPDR S&P 500 ETF (SPY), which holds net assets of US$412.8 billion, has seen slight growth of 3.44% since June, with YTD stock up 13.5%
- SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) with net assets valued at US$1.41 billion has seen their stock climb 3.2% since June, with growth of nearly 14% YTD
California says see you in court
Fighting fires. 🔥 Comparing Big Oil to Big Tobacco, California is suing fossil fuel producers for allegedly concealing environmental damage to the Golden State - and they’re not alone. The state’s litigation is reminiscent of the 1990s, when California held cigarette-makers to account, linking smoking to cancer, winning a payout in excess of US$360 billion paid across 25 years.
California is the world’s fifth largest economy. The state has faced hundreds of what they claim are climate-related wildfires this century - 56 this year alone - burning nearly 350,000 acres and killing four people - generating toxic smoke and dense smog. California’s People v. Big Oil alleges oil executives protected company profits by burying scientific evidence that connects the health and environmental impacts to fossil fuel production, demanding Big Oil now stump up for the cost dealing with these alleged impacts.