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Energy is the recurring theme at present – from both a political and economic perspective – with concerns over both pricing and availability. Rising energy costs due to shortages have been a major contributor to inflation, and therefore rising interest rates, as well as restricting manufacturing output levels, including the processing and upgrading of metals – especially related to nickel, aluminium and EV batteries.

Nations, particularly in Europe, are desperate to ensure energy security at a time of ongoing supply concerns and growing demand, as winter approaches. Politicians are on notice after the issues that impacted citizens during the last winter.

All forms of energy are benefitting price-wise – crude oil trading above $90 a barrel, gas and thermal coal at record prices, whilst uranium is also increasing in price and outperforming other assets classes as something of a quiet achiever.

Crude oil producer OPEC+ is battling to meet production quotas, US shale producers have not boosted output back to pre-covid levels as companies are focusing more on profitability, margins and shareholder returns – over volumes.

And it’s not just the supply of oil itself that has been struggling, we’ve also seen refining capacity in the West steadily declining as older refineries have closed. Refinery owners have closed ageing refineries and not invested in new capacity due to opposition to fossil fuels. Even prior to covid, there was a swathe of closures of ageing refineries as many though ‘peak oil’ was approaching.

Global refining capacity fell in 2021 – the first decline in 30 years – and US refining capacity is now at a 30-year low. However, refiners are enjoying record margins (known as the crack spread) due to a lack of refining capacity.

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