Higher oil prices are coming in 2023, European energy crisis is not over - Josh Young
(Kitco News) - The WTI crude oil price has fallen 40 percent from their peak of $123 per barrel in March, but don't expect them to keep falling, said Josh Young, CIO of Bison Investments. Young, who spoke to David Lin, Anchor and Producer at Kitco News, claimed that oil prices will keep rising in 2023.
"Over the next year, there is a good chance that oil prices are much higher," he said. "The things that have been hurting oil for the last six months, like OPEC overproducing relative to their capacity, Russia being able to export the full amount they were exporting pre-war, and Chinese demand being temporarily suppressed, [will] unwind."
He added that even with the possibility of a severe recession in 2023, oil prices won't remain lower.
"Even if there is a pretty bad world economic downturn that suppresses demand by 2 million barrels a day, which would be a little worse than what we saw in the financial crisis of 2008 to 2009… we could still potentially see much higher prices," said Young. "The world could actually still be under-supplied by 2 to 3 million barrels per day."
Will electrification reduce oil demand?
A few governments, such as Canada's and California's, are pushing for zero-emission vehicles on their roads. However, the rise of electric vehicles won't mean less oil demand, said Young.
"In countries that have shifted to a high percentage of electric vehicle adoption, their per capita oil consumption is actually not down," he said. "A shift to electric vehicles, I don't think, would solve the likely oil shortage that we're going to experience in the next number of years."
The reason for this, said Young, is because electric vehicles themselves "need energy as an input."
"They're just charging their batteries with coal, oil, or natural gas, or in some cases wind and solar," he said. "And then you think about the tremendous oil intensity to mine the materials that go into the batteries, power systems, and making the steel, you still end up with significant hydrocarbon intensity."
He added, "it's really hard, structurally, to destroy oil demand."
|This 'trigger point' caused the protests in China - Pyotr Kurzin|
European Energy Crisis
Europe's energy needs have been in peril this year ever since Russia, which supplies the bulk of the continent's natural gas and oil, has had its exports reduced. Despite the price of Dutch TTF natural gas futures (for January) falling 56 percent from their high of 345 euros in August, the European energy crisis is not over, said Young.
"We're starting to see natural gas prices rebound as winter arrives," he said. "Europe did effectively secure enough liquified natural gas shipments to fill up their storage, but their storage levels, along with their ability to import during winter, are insufficient relative to their normal use."
He added that, "It's going to be a tight winter… it does seem likely that European natural gas prices will rise considerably at some point this winter."
To find out Young's outlook for energy company stocks, watch the video above.
Follow David Lin on Twitter: @davidlin_TV
Follow Kitco News on Twitter: @KitcoNewsNOW