7 votes

Norway says ‘no’ to a gas price cap – Oslo's gas payday is equivalent to about £350 for each Norwegian man, woman and child

5 comments

  1. EgoEimi
    Link
    Quite important point. There simply is not enough gas. Households and industries must reduce usage. Economic pain is unavoidable this year. Hopefully once new terminals and pipelines are built the...

    Secondly, some sort of price signal maintenance is arguably important to ensure buyers reduce the demand, since the problem is in fact not having enough gas. If you don’t let prices do that, the alternative is rationing.

    Quite important point. There simply is not enough gas. Households and industries must reduce usage. Economic pain is unavoidable this year.

    Hopefully once new terminals and pipelines are built the situation will be improved next year.

    5 votes
  2. [4]
    skybrian
    Link
    I think it's important to make a distinction between prices and profits. High prices do more than anything else to encourage conservation. They are also very painful and regressive. But if you...

    I think it's important to make a distinction between prices and profits.

    High prices do more than anything else to encourage conservation. They are also very painful and regressive. But if you give people money without lowering the prices (using some UBI scheme, perhaps), they still have the same high incentive to conserve, because they can keep the money if successful.

    On the other hand, profits are an incentive to increase supply - that is, if anything can be done about it in time. Sometimes it's not possible. And on that note, here's an interesting Twitter thread about a German plan to tax the windfall profits of electricity generators - but without lowering spot prices.

    Getting back to this article, it's not clear what more revenue for Norway does to encourage supply?

    5 votes
    1. [3]
      Loire
      Link Parent
      We have a catch 22 situation in oil where the intention of eliminating it puts a cooling effect on large projects with intense investment requirements. The vast majority of Norway's oil and gas is...

      Getting back to this article, it's not clear what more revenue for Norway does to encourage supply?

      We have a catch 22 situation in oil where the intention of eliminating it puts a cooling effect on large projects with intense investment requirements.

      The vast majority of Norway's oil and gas is offshore which requires hundreds of millions to explore, prep and extract. Offshore projects typically run for decades and may not turn profitable for many years.

      Despite the energy crisis showing us we still need hydrocarbons, if the intention is to strangle oil and gas from 2030 onwards then there is absolutely no reason for an Equinor or Aker to risk increasing off shore production only for it to never make a profit.

      Unfortunately for Western Europe they don't have the easy on/off oil reserves North America, Russia and the Middle East has so, despite record profits, it's going to be a tough winter or two for the continent

      3 votes
      1. [2]
        skybrian
        Link Parent
        Yes, for long-term planning it’s ultimately a political question. I was under the impression, though, that in Norway there’s still support for oil and gas exploration, and the Greens who argue...

        Yes, for long-term planning it’s ultimately a political question. I was under the impression, though, that in Norway there’s still support for oil and gas exploration, and the Greens who argue against it are losing?

        1 vote
        1. Loire
          (edited )
          Link Parent
          I'm looking at it from a industry perspective rather than a political perspective because that's within my purview and expertise. I am not Norwegian and work for a Canadian oil company but I...

          I'm looking at it from a industry perspective rather than a political perspective because that's within my purview and expertise. I am not Norwegian and work for a Canadian oil company but I believe the values are similar.

          Yes Norwegians continue to support oil production for their own prosperity but the global tides are shifting against oil. Not just politically but if the Paris agreement is truly followed, and the phasing out of ICE vehicles truly kick in then the global consumption of oil will take a huge hit. The energy crispy in Europe is also pushing it heavily in the direction of renewables which will further decrease the global consumption of petroleum.

          The oil and gas industry is extremely growth dependant. When the consumption** of oil decreases the price of a barrel (and it's profitability) falls off a cliff. While some oil and gas will still be required globally, a drop in consumption will immediately make expensive long term projects like Norway's North Sea operations immediately unprofitable.

          All this is to say, the long term outcome for oil is not one that supports Norway increasing their offshore projects. This is why Equinor is both expanding to low cost short term reservoirs like American Shale, while also leading the big oil producers in investing in non hydrocarbon energy sources. There's no future in the offshore projects in developed nations, and Norway doesn't have any appreciable land based reserves.

          4 votes