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The Hill
a day ago
- Business
- The Hill
Why the Saudis have been driving down the price of crude oil
Last month, following a collapse in the price of Brent crude to a four-year low, Saudi Arabia and its OPEC+ partners announced their second consecutive monthly supply hike. Doubtless this will be seen in some quarters as an attempt to please President Trump, who promised his voters cheaper oil and recently praised the Saudi crown prince as 'an incredible man' and 'great guy.' Others will likely see it as a strategic blunder. Both interpretations on this apparently ill-timed decision are misguided. To understand why, we have to go back to 2020. Our real-time satellite monitoring of oil inventories had shown that the world was rapidly running out of space to store the crude oil that, thanks to the inertia caused by COVID-19 and the lockdowns, was no longer wanted at the same rate. Yet soon after the world went into lockdown, Saudi Arabia and Russia initiated an oil price war. It was widely received as a spectacular blunder, but my colleagues and I at Kayrros suspected there might be some method to the madness. The Edmond model Using the principles of game theory, our team, which includes Fields Medal laureate Pierre-Louis Lions and Jean-Michel Lasry, developed the Edmond model. This showed that to make as much money as possible, big low-cost producers such as Saudi Arabia had to strike a balance between selling at the highest price and having the greatest market share. Though OPEC may say its job is to keep prices stable, in fact the market swings up and down. When prices are up, Saudi Arabia and others make more money, but the smaller, higher-cost producers also start pumping more oil in an attempt to cash in. That extra supply, eventually, leads to price crashes. The big players know this. So after letting others flood the market, they strike back. They open the taps, flood the market themselves, and crash prices on purpose. The worse the crash, the more damage is done to the smaller players. The goal for the big players is to force their smaller rivals out. The fall in oil demand and subsequent price crash caused by COVID was worse than ever. Russia and Saudi Arabia saw this as a chance to push the system to its limits and see how much oil the world could physically store. With inventories full, prices went negative. Weaker competitors were squeezed out. Many U.S. shale producers went bankrupt. And both Saudi and Russia increased their power in the oil market. Déjà vu These crashes tend to need a trigger. In 2020, it was COVID-19. But in the late 1990s, it was the Asian financial crisis. In 2014, it was the U.S. shale oil boom. Today, the volatility caused by the policies of the U.S. administration marks another such trigger. With the supply of U.S. crude rising, and with some of the smaller OPEC+ members flouting quotas, Riyadh again seems to be preparing to act. As the Edmond model showed, it is worth Saudi Arabia enduring short-term pain to consolidate its share of the market, force out smaller rivals and send a message to any future competitors. What makes these circumstances different is that Trump has actively called for OPEC to increase its supply so that he can satisfy the desire among American voters for cheaper oil. In other words, he has given his counterparts in Riyadh a license to crash the market. Should prices keep falling, this would force U.S. oil companies to stop producing, and for a lengthy period. If markets are expecting a rally, or even stability, they are likely to be disappointed. And at the end of it all, Saudi Arabia, the great masters of the oil game, will be just where they want to be. Antoine Rostand is co-founder and president of global climate technology company Kayrros, where co-founder Antoine Halff serves as chief analyst.
Wall Street Journal
2 days ago
- Business
- Wall Street Journal
Saudi Arabia Is Grabbing Oil-Market Share, but It Can Open the Tap Only So Far
Why is Saudi Arabia pumping more oil into an already-full market? Riyadh looks fed up with propping up the oil price and losing market share. But launching price wars is becoming more painful. The Saudi-led OPEC+ group will return more than two million barrels a day of oil to the market by the fall if the cartel continues to unwind production cuts at its current rate. It is a U-turn for the group that spent the last two years curbing supply to boost the oil price. Based on estimates from Goldman Sachs, the additional supply could leave the world with around one million barrels a day of oil more than it needs in 2025 and 1.5 million barrels too many next year. Now seems an odd time to be opening the taps. The oil price was already falling in early April because of worries that President Trump's trade war would cause a global recession and hurt energy demand. Immediately after 'Liberation Day,' OPEC+ made things worse by announcing plans to unwind production curbs three times faster than anyone expected. Brent is down 8% since then to around $69 a barrel. OPEC has a record of using global shocks as a cover to tank the oil price and take market share. Antoine Halff, co-founder of geoanalytics firm Kayrros, points out that the cartel opened the spigots during the 1997 Asian financial crisis and in the early days of the 2020 pandemic, when there was such a glut that the oil price briefly turned negative. Lower oil prices can put high-cost competitors out of business, leaving low-cost producers to mop up. Saudi Arabia can break even on a barrel of oil even if prices fall to around $35, according to estimates from Rystad Energy. Crude has been trading around the mid-$60s a barrel for several weeks. At this level, margins are tight for some U.S. shale players—particularly in the Bakken oil field where producers struggle to break even below this price. This is causing a slowdown in American production. Since the beginning of 2025, the number of frack crews operated by publicly traded U.S. oil producers has fallen a fifth. The decline for private operators has been even sharper, data from Kayrros show. The Saudis may have sensed an opportunity to clip the wings of record U.S. crude production and curry favor with the White House at the same time. Trump wants low prices at the gasoline pump for consumers. Goldman Sachs analyzed the president's energy-related social-media posts since he joined Twitter in 2009 and found that his preferred oil price, based on benchmark U.S. WTI prices, is between $40 and $50 a barrel. This gives the Saudis and OPEC the green light to push down the oil price. Unloading more barrels onto the market also helps Saudi to slap the wrists of OPEC members such as Iraq and Kazakhstan that repeatedly overshoot their production quotas. But pushing oil prices too low is risky. Trump is happy to see energy costs falling, but if they drop into the danger zone for U.S. domestic production, it could trigger a backlash. Keeping things friendly with America could help Saudi get its hands on chips for its AI investments and foreign capital for costly projects such as the futuristic city Neom. Despite trying to diversify its economy, Riyadh still relies heavily on the money it makes from oil exports. The country's transformation plans laid out in Vision 2030 are proving costlier than expected, and the International Monetary Fund estimates that Riyadh needs $92 oil to balance its books. Falling energy prices are already causing a squeeze. The Saudi government's oil revenue dropped 18% in the first quarter of 2025 compared with a year ago. Meanwhile, non-oil revenue increased only 2%. Goldman Sachs analysts estimate that if Brent averages around $62 this year, Saudi's budget deficit could be more than double what the kingdom has penciled in. Saudi Arabia may be starting a market-share grab, but it is likely to be a cautious one. Write to Carol Ryan at
Yahoo
25-02-2025
- Automotive
- Yahoo
Trump's return is breaking climate policy—and that may be a good thing
California regulators just scrapped a plan to move trucks away from diesel. It's a sign of what's to come. Climate policy, as we know it, is falling apart. And now back in power, Donald Trump will take a wrecking ball to what's left. But that's not a disaster. It's an opportunity. For years, climate action has been failing. It's been a mess of promises and pledges, lengthy conferences, and targets set for dates far in the future. Yes, the motivations have been the right ones. But the fact is that all the while, emissions have kept going up. Our data at Kayrros shows methane leaks from the oil and gas industry are still increasing, despite global promises to cut them. The climate agenda is broken. Trump isn't the cause of this failure. He's a symptom of voter frustration. Many see climate policies that hurt them—higher energy bills, more red tape, bans on gas stoves, electric vehicle 'mandates'—and yet the climate crisis gets worse. They see symbolic solutions, like carbon offsets that move emissions elsewhere, or EVs that rely on a fossil-fuel-powered grid. It's no wonder many people are losing patience. Trump's first term proved he is willing to break with orthodoxy. He pulled out of the Paris Agreement, yet U.S. emissions kept falling, largely due to market forces. He cut regulations, yet American firms led the world in energy innovation. His second term will likely see more of the same: less bureaucracy, fewer grandiose pledges, and more skepticism toward green subsidies and global climate deals. Who can blame those who think this is bad news for the planet? It flies in the face of what we're used to. But it doesn't have to be. In fact, it's a chance to fix what is broken. The focus outside the U.S. now must shift from lofty goals to hard realities. Fossil fuels aren't vanishing overnight. Pretending otherwise just leads to bad policy—bans, mandates, and subsidies that ignore the fact that people and businesses still need reliable, affordable energy—and animates climate denialists, who can exploit people's frustrations. The answer isn't more top-down control from the world's governments. It's smarter climate action. Hitting methane super-emitters is a perfect example. A tiny number of leaks from these account for a huge share of global warming. The technology to find and fix them already exists. Satellites can spot emissions in real time; AI and geoanalytics can make sense of the data. Targeted policies, like fines for the worst offenders, akin to speeding tickets for those who drive too fast, would cut emissions quickly, without disrupting energy supply. But market solutions, not bureaucracy, must lead the way. The private sector is already ahead of governments in numerous respects. Companies are using AI and satellite data to track emissions with precision. Investors are shifting money toward efficient, low-carbon solutions because they see opportunity, not because a regulator told them to. Firms are investing in breakthrough low-carbon technologies, from advanced battery storage to small modular reactors and next-generation carbon capture systems, because they see a clear business case. As the cost of clean technology falls and consumer demand for sustainability grows, companies that fail to adapt will be left behind. At the same time, energy firms are innovating to improve the efficiency of fossil fuel extraction and consumption. Reducing methane leaks, improving refining techniques, and developing hybrid energy solutions all lower emissions without cutting off the energy supply that people still need. These are the kinds of practical, high-impact measures that actually make a difference. Any government climate policy should be just as hard-headed and data-driven. That means ditching wishful thinking and embracing pragmatism. It means making polluters pay in ways that are easy to enforce. It means investing in breakthrough technologies that bring down emissions without killing industries. It means focusing on what works rather than what sounds good, or would work in an ideal world. And it means abandoning those marginal policies that upset consumers, punish businesses, and make little or no difference to the state of the climate. A second Trump term will not be the end of climate action, for the simple reason that the climate crisis is real, and getting worse, and we are experiencing its effects more and more. But it will be the end of climate theater. And that's a good thing. We now have a chance to reset: to build a strategy that is effective, realistic, and, for the most part, independent of politics. That is what the planet needs. The opinions expressed in commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune. Read more: Patagonia CEO: The 'energy emergency' is disingenuous—and we're wasting time not addressing the real threat The path to net zero that doesn't punish consumers, businesses, or politicians To help save the climate, CEOs need to become 'Chief Coalition Builders ' The winning fight against climate change lies at the intersection of environmentalism and economics This story was originally featured on
Yahoo
12-02-2025
- Business
- Yahoo
Opinion - Cut climate emissions by ticketing the worst offenders, like speeding drivers
Starting this year, companies importing fuel into the European Union will be asked to provide comprehensive data on the quantity of methane emitted during the fuel's production. In two years' time, any failure to meet the bloc's criteria will trigger a 'system of penalties' that could (and is likely to) include 'penalty payments or fines' for importers. This legislation, which my colleagues at Kayrros helped make possible due to our expertise in methane monitoring, will benefit the climate and should be viewed by companies as an opportunity not just to reduce their carbon footprints, but to gain a greater understanding of their operations. That in turn will help them identify inefficiencies and areas for improvement, and ultimately extend their license to operate and outcompete dirtier suppliers. Elsewhere, however, the climate has fallen down the political agenda. The United States is now considering abolishing methane emission rules put in place by the previous administration, which had sought to align U.S. methane regulations with European standards to facilitate trade in liquified natural gas. If those regulations are scrapped or watered down, European importers may struggle to meet the EU's stringent reporting and emissions standards. This conundrum is made all the more difficult by President Trump's recent statement that if the EU doesn't want to face crippling tariffs on trade, 'the one thing they can do quickly is buy our oil and gas.' Methane, it's worth reminding ourselves, frequently leaks during fossil fuel production and delivery and is particularly damaging to the environment. Over 20 years, it heats the atmosphere 84 times more powerfully than carbon dioxide. On current trends, it is projected to account for half of global warming in the next two decades. If the EU, keen to avoid a trade war, rolls over on methane regulations, we'll need to change tack to bring down methane quickly. The best way to do this is to narrow the scope of the regulations and target so-called 'super-emitters' — intermittent sources of methane and other greenhouse gases that release disproportionately large amounts of emissions compared to typical sources. These emissions are so large that, thanks to recent scientific advances, they can easily be seen from space. Exact definitions vary, but most agree that super-emitters refer to emission events of several tons of methane per hour, and include sources like oil and gas facilities, landfills and large agricultural operations. In the oil and gas industry, large amounts of methane emissions are often the result of leaks, equipment failures or inefficient and outdated operational practices. This makes super-emitters, as opposed to more diffuse and smaller leaks, also remarkably easy and cost-effective to fix. And because they account for a large share of overall emissions and are so hugely concentrated, the cost-benefit of tackling them is a no-brainer — the payoff in terms of overall climate benefits and avoided greenhouse gases is phenomenal. Indeed, holding methane super-emitters to account, as opposed to scrutinizing the entire lifecycle emissions of fossil fuels, would be a much more straightforward and effective policy — and a much less burdensome one for both industry and government — than the more arcane rules that the United States is set to tear up, and that the EU aims to implement. While the EU has set lofty and commendable climate targets, its current approach to methane regulations is overly complicated. Under the current plans, it is the EU that bears the responsibility of identifying, locating and penalizing companies responsible for imported methane emissions. That is inefficient and laborious, perhaps to the point of elusiveness. Instead, businesses themselves should be required to make sure they do not cause any super-emitter event. If they fail to do this, then they should be subject to fines, just as individual drivers who break the speed limit are legally bound to pay a financial penalty. If for one reason or another a driver disagrees with the charge that they've broken the speed limit, then they're within their rights to contest the fine and provide evidence that no wrongdoing has occurred. Likewise, businesses fined for super-emitters should have the right to argue that they didn't break any rules and present their reasons for thinking that. This behooves those companies eligible for the EU's methane laws to monitor their emissions closely on an ongoing basis, for fear of falling foul of the rules and being slapped with a hefty fine. The data they need to do that can be effectively, cheaply and unobtrusively gathered using Earth Observation technology, which combines satellite imagery with artificial intelligence, machine learning and geoanalytics, to provide a comprehensive view of what's happening on the ground across a business's operations — and then, ideally, interpreted by environmental intelligence professionals, who can recommend sustainable and effective changes informed by that business's baseline emissions. The European Space Agency showed last year that the elimination only of super-emitters detected from space — something eminently practicable and cost-efficient — would be equivalent in emissions terms to the annual carbon sequestered by 11 billion tree seedlings grown for 10 years. Put differently, it would be like removing 160 million cars from the road or the equivalent of France's total carbon footprint. That's the opportunity that lies in wait. If the EU is going to relax its rules around methane to preserve good relations with the U.S., then another effective strategy is needed to tackle harmful methane emissions. The simplest and the best is to take an approach that has worked brilliantly to improve road safety around the world: slap the negligent emitters with a fine. Antoine Rostand is president and co-founder of global climate technology company Kayrros. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The Hill
12-02-2025
- Business
- The Hill
Cut climate emissions by ticketing the worst offenders, like speeding drivers
S tarting this year, companies importing fuel into the European Union will be asked to provide comprehensive data on the quantity of methane emitted during the fuel's production. In two years' time, any failure to meet the bloc's criteria will trigger a 'system of penalties' that could (and is likely to) include 'penalty payments or fines' for importers. This legislation, which my colleagues at Kayrros helped make possible due to our expertise in methane monitoring, will benefit the climate and should be viewed by companies as an opportunity not just to reduce their carbon footprints, but to gain a greater understanding of their operations. That in turn will help them identify inefficiencies and areas for improvement, and ultimately extend their license to operate and outcompete dirtier suppliers. Elsewhere, however, the climate has fallen down the political agenda. The United States is now considering abolishing methane emission rules put in place by the previous administration, which had sought to align U.S. methane regulations with European standards to facilitate trade in liquified natural gas. If those regulations are scrapped or watered down, European importers may struggle to meet the EU's stringent reporting and emissions standards. This conundrum is made all the more difficult by President Trump's recent statement that if the EU doesn't want to face crippling tariffs on trade, 'the one thing they can do quickly is buy our oil and gas.' Methane, it's worth reminding ourselves, frequently leaks during fossil fuel production and delivery and is particularly damaging to the environment. Over 20 years, it heats the atmosphere 84 times more powerfully than carbon dioxide. On current trends, it is projected to account for half of global warming in the next two decades. If the EU, keen to avoid a trade war, rolls over on methane regulations, we'll need to change tack to bring down methane quickly. The best way to do this is to narrow the scope of the regulations and target so-called 'super-emitters' — intermittent sources of methane and other greenhouse gases that release disproportionately large amounts of emissions compared to typical sources. These emissions are so large that, thanks to recent scientific advances, they can easily be seen from space. Exact definitions vary, but most agree that super-emitters refer to emission events of several tons of methane per hour, and include sources like oil and gas facilities, landfills and large agricultural operations. In the oil and gas industry, large amounts of methane emissions are often the result of leaks, equipment failures or inefficient and outdated operational practices. This makes super-emitters, as opposed to more diffuse and smaller leaks, also remarkably easy and cost-effective to fix. And because they account for a large share of overall emissions and are so hugely concentrated, the cost-benefit of tackling them is a no-brainer — the payoff in terms of overall climate benefits and avoided greenhouse gases is phenomenal. Indeed, holding methane super-emitters to account, as opposed to scrutinizing the entire lifecycle emissions of fossil fuels, would be a much more straightforward and effective policy — and a much less burdensome one for both industry and government — than the more arcane rules that the United States is set to tear up, and that the EU aims to implement. While the EU has set lofty and commendable climate targets, its current approach to methane regulations is overly complicated. Under the current plans, it is the EU that bears the responsibility of identifying, locating and penalizing companies responsible for imported methane emissions. That is inefficient and laborious, perhaps to the point of elusiveness. Instead, businesses themselves should be required to make sure they do not cause any super-emitter event. If they fail to do this, then they should be subject to fines, just as individual drivers who break the speed limit are legally bound to pay a financial penalty. If for one reason or another a driver disagrees with the charge that they've broken the speed limit, then they're within their rights to contest the fine and provide evidence that no wrongdoing has occurred. Likewise, businesses fined for super-emitters should have the right to argue that they didn't break any rules and present their reasons for thinking that. This behooves those companies eligible for the EU's methane laws to monitor their emissions closely on an ongoing basis, for fear of falling foul of the rules and being slapped with a hefty fine. The data they need to do that can be effectively, cheaply and unobtrusively gathered using Earth Observation technology, which combines satellite imagery with artificial intelligence, machine learning and geoanalytics, to provide a comprehensive view of what's happening on the ground across a business's operations — and then, ideally, interpreted by environmental intelligence professionals, who can recommend sustainable and effective changes informed by that business's baseline emissions. The European Space Agency showed last year that the elimination only of super-emitters detected from space — something eminently practicable and cost-efficient — would be equivalent in emissions terms to the annual carbon sequestered by 11 billion tree seedlings grown for 10 years. Put differently, it would be like removing 160 million cars from the road or the equivalent of France's total carbon footprint. That's the opportunity that lies in wait. If the EU is going to relax its rules around methane to preserve good relations with the U.S., then another effective strategy is needed to tackle harmful methane emissions. The simplest and the best is to take an approach that has worked brilliantly to improve road safety around the world: slap the negligent emitters with a fine.
