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Trump’s Relationship with the Price of Oil

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Correction: An earlier version of the graphic stated “U.S. sanctions on Iran’s oil exports take effect.” This was incorrect. On Nov. 4, 2019, U.S. sanctions on Iranian exports did take effect but Iranian oil exports were exempted from the sanctions. A new graphic has been posted with the correction. Visual Capitalist regrets the error.

Visualizing Trump’s Relationship with the Price of Oil

What goes through the head of a U.S. president?

That is a question that both voters and leaders alike would love to know the answer to. As it stands, scores of pundits and analysts already dissect everything from the choice of a tie, to whom a leader sits next to at a state dinner, to glean the potential direction of government policy.

Financial markets rely on the accurate interpretation of government policy to guide investment decisions. But what happens when you’re faced with a world leader who broadcasts his unfiltered thoughts instantaneously and globally? It’s sure to stir up international attention.

This week’s chart is inspired by work done by John Kemp, an energy reporter for Reuters. Kemp tracked all instances of U.S. President Donald Trump’s tweets mentioning oil and OPEC, against the shifting price of oil.

Where’s Your Head At?

U.S. President Donald Trump has actively worked to tie the success of his administration to the fortune of the economy and stock market.

If the economy does well, Trump hopes cheap gas at the pump will help translate into votes at the ballot box in 2020.

The key to keeping the economy growing is access to cheap energy, and oil is the critical commodity that’ll keep a fragile economy on the road. This is a line of thinking that can be seen throughout Trump’s tweets on the subject.

Tracking Trump’s Tweets

This week’s chart tracks President Donald Trump’s tweets from April 2018 to March 2019 that mention oil and OPEC.

Pre-Sanctions

The tweets start five months before the deadline of sanctions on Iran. During this timeframe, speculation that Trump would place sanctions on the oil-producing nation drove up the price with the prospect of a restricted supply of oil and increased tensions in the Middle East.

Despite the implications of U.S.-imposed sanctions, Trump squarely put the blame on OPEC for this period of rising oil prices. Tweets such as “OPEC is at it again. Not Good!” or “The OPEC monopoly must get price down now!” can be seen in this period.

Whether these tweets had any influence on oil producers is unclear, but they certainly outline a policy preference for cheap oil and a general animosity towards OPEC.

Post-Sanctions

On Nov. 4, 2018, Trump did impose sanctions but excluded Iranian oil exports, deflating a speculative bubble around the price of oil, and the president’s ire towards the region.

In the aftermath of sanctions, repeated news of record oil production and growing energy independence in the U.S. helped drive the price of oil back down. Though the president’s mood lightened, he still persisted in his accusations of OPEC manipulating the price.

Prices continued to fall, plummeting to nearly $50 per barrel by the end of 2018. Cheap oil is a direct threat to the profits of OPEC nations, but higher prices can create an array of challenges for the U.S. economy.

So despite a U.S. alliance with Saudi Arabia, this is a natural tension baked into the relationship.

So, what would a U.S. foreign policy look like without dependence on the Middle East?

Shifting Sands

The Middle East has had a considerable influence on U.S. foreign policy since the harsh lessons of 1970s energy crisis. Multiple wars of intervention to protect Saudi oil interests—and in turn, ensuring continued American access to oil—have ravished the region and led to a state of dysfunction and constant tension.

However, with the recent declaration of American energy independence, this relationship may change with a renewed prospect for peace. Trump may work to further undermine the power of OPEC to control oil prices, as well as the Middle East’s influence on U.S. foreign policy.

American energy independence is already challenging established relationships around the world. For example, Ukraine just recently accepted its first shipment of American oil in a move to counter Russia’s influence in the region.

A New Era

Diplomacy by Twitter has yet to prove to be an effective bridge in sustaining good international relations. That said, charting the tweets of world leaders is a unique way to interpret government policy and energy economics in this new era of social media.

It seems that the next time you want to know what is going through a leader’s head, you can simply try checking their tweets.

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Energy

Charting the Flows of Energy Consumption by Source and Country (1969-2018)

For the last 50 years, fossil fuels have dominated energy consumption. This chart looks at how the energy mix is changing in over 60+ countries.

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Energy consumption by source and country

Charting Energy Consumption by Source and Country

View the interactive version of this post by clicking here.

Over the last 50 years, the world has seen a colossal increase in energy consumption—and with the ongoing transition to renewable energy, it’s interesting to look at how these sources of energy have been evolving over time.

While some countries continue to rely heavily on fossil fuels like oil, coal, and natural gas, others have integrated alternative energy sources into their mix.

This visualization comes to us from Brian Moore and it charts the evolution of energy consumption in the 64 countries that have data available for all of the last 50 years.

Tera-What? The Most Prominent Sources of Energy (2009-2018)

First, let’s take a look at which sources have produced the most energy over the last decade of data. Energy consumption is measured in terawatt-hours (TWh)—a unit of energy equal to outputting one trillion watts for an hour.

Energy Source% of Total Energy Consumption
(2009-2018)
Sum of Total Energy
(2009-2018) (TWh)
Oil34.3%509,800
Coal29.2%434,300
Gas22.8%339,300
Hydropower6.7%99,200
Nuclear4.6%68,800
Wind1.3%18,700
Geothermal/Biomass/Other0.9%12,700
Solar0.4%5,700
Total100.0%1,389,300 TWh

Looking at this data, it’s clear that fossil fuels have been used much more than alternative sources. A deeper dive into the topic helps explain why.

Fossil Fuels: What the Data Shows

As the predominant source of energy, fossil fuels collectively accounted for a massive 86.2% of total energy consumption over 2009-2018, or roughly 1.2 million TWh. If you’re wondering, that’s enough to power the equivalent of 109 billion U.S. homes with electricity for a year.

Among fossil fuel sources, oil emerges as the clear leader, responsible for 34.3% or 509,800 TWh of energy consumption over 2009-2018. Apart from being the primary fuel for transportation throughout history, oil remains relatively affordable—making it an easy choice for producers and consumers alike.

Closely following oil is coal, which countries rely on for its abundance, low costs, and low infrastructure requirements. Over the last decade of data, 29.2% of total energy came from coal, amounting to a substantial 434,300 TWh.

As a cleaner alternative to coal, natural gas has increased in popularity. Gas accounted for 22.8% or 339,300 TWh of energy consumed between 2009-2018, mainly attributed to its ample supply and affordability.

What About Renewables?

Only 13.8% of energy consumption over 2009-2018 came from renewable or alternative sources of energy, and hydropower accounts for nearly half of it. Why has the use of environmentally-friendly energy sources been so low?

Setting up alternative power plants—especially wind, solar, and nuclear—requires significant capital investment, while facing competition from cheaper and more convenient fossil fuels. The barriers to adopting renewable energy have been weakening, but still remain quite high for low-income countries.

Wind and solar energy were responsible for a mere 1.7% of energy consumption. Compared to fossil fuels like oil and coal, this percentage seems even more minuscule than it does on its own—mainly attributable to the high costs traditionally associated with wind and solar energy.

The Top 10 Countries Relying on Fossil Fuels

Fossil fuels have been the predominant source of energy over the years. After all, 43 of these 64 countries sourced more than 80% of their energy from fossil fuels over 2009-2018.

Here are the ones that come out on top:

Country% of Energy Consumed From Fossil Fuels
(2009-2018)
Most Used Fossil Fuel
(2009-2018)
Oman 🇴🇲100%Gas
Saudi Arabia 🇸🇦100%Oil
Trinidad and Tobago 🇹🇹100%Gas
Kuwait 🇰🇼100%Oil
Qatar 🇶🇦99.9%Gas
United Arab Emirates 🇦🇪99.9%Gas
Hong Kong 🇭🇰99.9%Oil
Algeria 🇩🇿98.8%Gas
Singapore 🇸🇬98.8%Oil
Israel 🇮🇱98.1%Oil

Although it is startling to see that several countries were 100% reliant on fossil fuels, it comes as no surprise that these are countries with abundant reserves of oil or natural gas. Not only are fossil fuels central to certain economies in Middle Eastern and North African (MENA), but they also remain highly affordable for consumers in these places.

On a broader scale, developing and low-income countries are heavily dependent on fossil fuels such as coal for access to cheap electricity and ease of installation.

The Top 10 Countries Using Alternative Energy Sources

The transition to alternative energy sources has been welcomed by many countries, but only a few have prioritized its adoption in the energy mix. Here’s a look at the top 10:

Country% of Energy From Alternative Sources
(2009-2018)
Most Used Alternative Energy Source
(2009-2018)
Iceland 🇮🇸81.6%Hydropower
Norway 🇳🇴67.5%Hydropower
Sweden 🇸🇪65.3%Hydropower
Switzerland 🇨🇭50.5%Hydropower
France 🇫🇷47.0%Nuclear
Finland 🇫🇮39.5%Nuclear
New Zealand 🇳🇿37.2%Hydropower
Brazil 🇧🇷37.2%Hydropower
Canada 🇨🇦34.8%Hydropower
Austria 🇦🇹31.7%Hydropower

Iceland is the only country to have sourced over 80% of its energy from alternative sources over 2009-2018. In general, developed European countries are leading the charge—with Iceland, Norway, Sweden, Switzerland, and France making the top five.

The dominance of hydropower is notable, and so is the lack of wind and solar energy sources. Denmark had the highest percentage of wind energy in its mix, with 14.5%, whereas Italy had the highest percentage of solar, with just 2.4%.

It should be kept in mind that this percentage does not account for population differences. For example, although Italy boasted the highest percentage of solar in its energy mix with 2.4%, China consumed the most amount of energy from solar sources—despite it accounting for only 0.3% of total Chinese energy consumption.

Nevertheless, the costs of solar and wind energy have been falling continuously, and the potential for growth in the renewable energy sector is higher than ever.

The Transition to Renewables: Are We On Track?

Since the Industrial Revolution, fossil fuels have been the primary source of energy worldwide. More recently, the use of renewable energy sources has increased, but not substantially enough.

This predominant reliance on fossil fuels is not doing the transition to renewable energy any favors, but it shines a light on the massive untapped potential for alternative energies, especially in the developing world.

With the prices of renewable energy at record lows and increasing investment flows, the next decade will be a defining one for the global transition to clean energy.

Correction: A modified version of Brian Moore’s visualization was previous published here. We’ve since updated it to the original design.

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Energy

Tracking the Growing Wave of Oil & Gas Bankruptcies in 2020

Dropping crude prices and a worsening pandemic have led to a growing wave of energy bankruptcies. Here’s what that fallout looks like.

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The Growing Wave of Oil & Gas Bankruptcies in 2020

2020 hasn’t been kind to the energy sector, and a growing wave of energy bankruptcies has started to build.

After a difficult year marred by rising geopolitical tensions in the Middle East and crude prices in the $50-60 per barrel range, analysts warned that the energy sector needed a strong recovery to offset a rising (and expiring) mountain of debt.

Instead, the oil patch has seen one bombshell after another, and the impacts are adding up.

Fueling the Wave’s Growth

The new year opened with a U.S. attack on a top-ranking Iranian general in Baghdad, followed by an Iranian counterattack on two bases in Iraq that hosted U.S. military personnel.

Then, the energy industry worried that the Organization of the Petroleum Exporting Countries (OPEC) wouldn’t renew its production deal with non-member countries, causing increased production and negative pressure on crude prices.

All the while, the threat of COVID-19 grew and started to spread. In March, the new coronavirus hit markets hardest, right as the OPEC+ deal collapsed. Russia and Saudi Arabia subsequently flooded the markets with cheap oil, starting a price war to drive out competition.

What developed was the perfect storm of nonexistent demand matched up against oversupply. Crude prices plummeted and hit a historic sub-zero low on April 20th, with futures for West Texas Intermediate (WTI) Crude closing at -$37.63.

The Wave’s Initial Damage

Now, following a renewed OPEC+ deal limiting production agreed upon on April 9th and slowly restarting economies driving up crude demand, prices have started to tick up.

Unfortunately, the damage has already been done and will take a long time to recover. By charting the sector’s bankruptcies over the first half of 2020—tracked by law firm Haynes and Boone, LLP for the U.S. and Insolvency Insider for Canada—we can see the wave start to swell:

Company TypeQ1 BankruptciesQ2 BankruptciesTotal (H1 2020)
Oil & Gas Producer71825
Oilfield Services71219
Midstream Services213
Total163147

For oil and gas producers, the second quarter of 2020 saw 18 bankruptcies, the highest quarterly total since 2016.

So far, they’re largely centered in the U.S., which saw a boom of surface-level shale oil production in the 2010’s to take advantage of rising crude prices. As prices have dropped, many heavily leveraged companies have started to run out of options.

Company TypeQ1 Total DebtQ2 Total DebtTotal (H1 2020)
Oil & Gas Producer$1.4 billion$29.2 billion$30.7 billion
Oilfield Services$10.8 billion$13.2 billion$24 billion
Midstream Services$0.2 billion$0.2 billion$0.5 billion
Total$12.5 billion$42.7 billion$55.1 billion

The biggest victim in the first half of 2020 was Chesapeake Energy, a shale giant that declared bankruptcy on June 28 with more than $9 billion in debt.

Canada has also seen an uptick in energy bankruptcies, especially after facing years of stiff competition from U.S. shale producers. However, the number of cases in Canada is far fewer than in the United States.

One reason is that companies staved off bankruptcy or receivership in four of the seven insolvency cases in Canada since January 2020, at least temporarily. Instead, they are seeking protection under the country’s Companies’ Creditors Arrangement Act, giving them a chance to restructure and avoid insolvency.

A Prolonged Fallout

Another reason for the discrepancy in bankruptcy numbers is timing. The energy sector faced its biggest challenges in 2015/2016, causing many companies to take on debt.

Unfortunately, much of that debt is starting to expire, or becoming too difficult to pay off in the current market conditions.

That’s why, despite the wave of bankruptcies caused by COVID-19 gaining steam, the wave will continue well into 2020 and likely beyond.

July has already seen more companies declaring bankruptcy or seeking creditor protection. The question is, how many more are waiting to surface?

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