Investors are betting that the pandemic will soon be under control – and this in turn will release the suspended demand for car rides, cruises, flights and other oil-consuming activities.
OPEC + could soon announce that the market is now healthy enough to increase production in the spring.
“Given the lure of higher prices, there should be more supply in the market,” said Ryan Fitzmaurice, energy strategist at Rabobank.
“Given where prices are, how will anyone tell Russia they need to limit production?” said Jim Mitchell, chief of U.S. oil analysts at Refinitiv.
There are several good reasons why OPEC + is releasing more barrels.
First, higher prices mean that countries like Saudi Arabia, which depend on oil to balance their budgets, can bring in revenues that are much needed.
Bank of America strategists told clients in a recent note that OPEC + will “maintain market share” by pumping more soon. In the second quarter alone, Bank of America expects OPEC + to add more than 1.3 million barrels per year. Delivery day.
There is another reason why OPEC + will act before it is too late: self-preservation.
If gasoline prices continue to rise and hit $ 3 per barrel, Gallon – and beyond – it will only accelerate investment in clean energy and persuade more drivers to dump their gas-guzzling SUVs into electric vehicles.
“If oil shoots up to extreme levels,” said Rabobank’s Fitzmaurice, “it will only help the history of renewable energy and eat away at oil demand.”
The switch to electric means more expensive recalls
The numbers: The recall costs $ 1 trillion won by Hyundai or $ 900 million. On a vehicle basis, the average cost is $ 11,000 – an astronomically high recall figure.
The episode signals how electrical car failures could create huge costs for car manufacturers – at least in the near future, my colleagues Chris Isidore and Peter Valdes-Dapena report.
The recall is another indication of how expensive EV batteries are in relation to the price of the whole car. Until the price of batteries falls through greater worldwide production and economies of scale, the cost of manufacturing electric vehicles will remain higher than comparable gasoline cars.
When batteries become cheaper, as expected in the coming years, electric cars can become much cheaper to build because they have fewer moving parts and require as much as 30% fewer hours of working time to assemble compared to traditional vehicles.
Fewer parts on electric vehicles may also mean that auto-calls will become less common in the future. But so far, there can be significant costs if battery fire issues require battery replacement.
Monday: US ISM Manufacturing Index
Tuesday: Target, Kohls, AutoZone, AMC Entertainment and HP Enterprise earnings
Wednesday: US ISM Non-Manufacturing Index; EIA crude oil stocks; Dollar Tree, Stellantis and American Eagle earnings
Thursday: OPEC + meeting; US jobless claims Kroger, Gap and Costco earnings
Friday: Report on US jobs for February; Large lots of earnings