Watch: Barron’s Senior Energy Writer Laura Sanicola and Global Head of Energy Analysis at OPIS Tom Kloza discuss what’s ahead for oil this week.

Transcript:

LAURA SANICOLA: This is Laura Sanicola, author of Barron’s Energy Insider newsletter. And today, I’m joined with my colleague, Tom Kloza, Global Head of Energy Analysis at OPIS.

Tom, let’s talk fuel prices. The next administration’s heading into office with some of the lowest gasoline prices seen since the dark days of the COVID pandemic in twenty twenty-one. This can’t be good for refiners’ fourth-quarter outlooks. Right?

TOM KLOZA: No. It’s very, very, challenging for refiners. They had a challenging third quarter, and the fourth quarter so far, we’re about at the halfway point, has been absolutely miserable. I mean, if this were to continue into, let’s say, first and second quarter two thousand twenty-five, you would see some rationalization of some assets in North America.

I would suggest though that the next five or six weeks tend to be one of the most challenging parts of the year for any kind of oil prices, crude oil prices, gasoline prices, diesel prices.

Demand is quite low. We get one Christmas week where demand is brisk, and then it’s down into the sinkhole of very, very low winter demand.

SANICOLA: So good for consumers, bad for refiners.

How much oil do you think the world is really gonna need next year? I know the OPEC plus cartel has revised down their forecast by about a hundred thousand barrels per day. Now they say oil demand is only expected to grow about one point five million barrels per day next year.

And, of course, the International Energy Agency is forecasting much lower growth than that. Which do you think is more likely, and what are the implications?

KLOZA: Well, they they both have vested interest to a certain extent, but the OPEC, prognostication of growing by about one point eight five million barrels a day has to be way off. It’s really predicting what they want to happen.

If they believe that, they may release more oil in January first and subsequently through the year, and we could really see an overreaction that carries well into two thousand twenty five.

SANICOLA: Let’s end by talking a bit about policy.

The incoming Trump administration is reportedly planning to ax the seventy five hundred dollar, EV tax credit to purchase an electric vehicle, that was put in the Inflation Reduction Act, and, president-elect Trump has also nominated former New York congressman Lee Zeldin, the head of the Environmental Protection Agency.

What do these two things mean, for the outlook for refiners and biofuel producers?

KLOZA: Well, I think on the EV front, it means that we’re gonna get a three or four year break from all of these efforts to electrify, the country’s fleet.

There’s no question that you need those incentives. Now battery progress, may obviate that, but I think generally means a lot less electric car sales. I would mention though that with the exception of China, you don’t get that much traction, where you sell a million EVs and maybe it cuts down on demand by about twenty five thousand barrels a day. As far as administrator Zeldin goes, we gotta see what he says about renewable fuels and ethanol and biodiesel and all of these other efforts out there. There was a lot of money dispersed and that will be continue to be dispersed by the IRA.

And in the past, he’s been very, very downbeat on those efforts to use more renewables rather than, traditional fossil fuels.

SANICOLA: Alright. Thanks so much, Tom, and we’ll see everybody next week.

KLOZA: Thank you.