The Organisation of the Petroleum Exporting Countries opened the spigots and pushed output from the cartel to its highest level since the start of 2023. LNG producers in the US signed off a record volume of new export projects, wagering that foreign buyers will mop up an excess of domestic gas. Chinese coal output hit a fresh record, with a 1.4 per cent increase relative to a year earlier.
It’s not working. The year’s fossil fuel output boom is now piling up in inventories, sending prices slumping. Oil on water – the amount of crude sitting around in tankers because it’s either in transit, or waiting to find a buyer onshore – has hit the highest level since April 2020, when prices went negative as the COVID-19 pandemic devastated demand.
Loading
Egypt, India and Pakistan have all been deferring or cancelling LNG cargoes and Japan’s Jera Co., long the biggest buyer of LNG, is turning seller to get rid of its excess. Some 90 per cent of the modest increase in Chinese coal production this year ended up in stockpiles rather than furnaces.
Fossil fuel producers have immense power to set the terms of the debate on energy. In the Middle East, their interests and those of the state are so intertwined that they’re effectively indistinguishable. In Russia, the US, and elsewhere petroleum producers have been able to capture the government, even though they’re far less important to the domestic economy. Coal production in India, China and Indonesia, likewise, has political importance far above its value in power and industry.
Still, it’s consumers who will have the final say. Surging prices for copper and silver – and for other clean-energy mainstays, such as lithium carbonate and solar-grade polysilicon, both now at their highest levels in about 18 months – indicates stronger demand for clean power than carbon-based energy.
Like Russia’s 2022 invasion of Ukraine, the arrival of the revanchist Trump administration was seen by boosters as an opportunity to demonstrate fossil fuels’ indispensability to the world.
As with that previous geopolitical shock, the promise is crumbling in less than a year. The petrostates that dominated the 20th century have had their day. The future is electric.
David Fickling is a Bloomberg opinion columnist covering climate change and energy. Previously, he worked for The Wall Street Journal and the Financial Times.
Ruth Pollard is a Bloomberg opinion managing editor. Previously she was Middle East correspondent for The Sydney Morning Herald.
