Oil update: The same, for now

From the January-February 2024 edition of Supply Chain Management Review.

January-February 2024

Back in 2019, we seemed on a consistent path to the future. Then COVID-19 arrived on the global scene, and all predictions went out the window. As 2024 begins, everyone wants to know what the year will look like. I…

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This is my annual update on oil that began with my first Insights column: “Is your supply chain addicted to oil?” (Jan./Feb. 2007). Since, I’ve focused on the price of oil because freight costs are a sizable (and controllable) portion of supply chain costs. Also, because it appeared that oil prices would rise over time, it was obvious that supply chains would have to be more energy-efficient and much less dependent on oil. Initially, the tagline was “supply chains needed to slow down” because highly responsive chains were energy inefficient. Furthermore, once there were climate concerns, oil got a “dirty name”—as a polluting CO2 fuel—that became another important reason to squeeze oil out of supply chains.

As the title of this column suggests, things appear to be the same for a while in the turbulent oil/energy markets. The titles of my last four updates that follow tell most of the story of the recent past.

• “Oil Update: Fracking challenged with cheaper oil” (2020).
• “Oil Update: Still need fracking?” (2021).
• “Oil update: Where’s the global energy plan?” (2022).
• “Oil update: We need security plans from policymakers” (2023).

Over the past several decades, shale fracking in the United States played a major role in moving the oil markets away from the too-often political whims of OPEC and other major oil-exporting countries. Fracking, for a while, became a stabilizing factor in moving the market closer to a free market based largely on supply versus demand principles. While pricing did not grow as fast as expected, it was more volatile and reactionary to major economic crashes, wars, and the COVID-19 pandemic. These events caused either demand or supply to significantly change, and with that, oil pricing as well.

Relative to climate change initiatives, my understanding, until recently, was there was a tacit agreement that there was a global strategy to move away from fossil fuels, by first using natural gas as a bridge fuel to replace almost all coal, and then oil use. Eventually replacing natural gas with renewables and other non-polluting energy sources.

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