All energies are crashing.
Oil is leading as a global glut forces the price to the highest marginal producer in US shale. That is around $60 WTI, but it will probably have to overshoot to drive production down. That’s another $10-15 fall in WTI:
Shale has become less responsive to falling rigs owing to immense efficiencies and the consolidation of oil majors. The price may need to sink even lower than I think to disrupt such deep pockets.
Gas is even more troubled. Inventories in the US and Europe are at seasonal records after a warm winter so far.
Ahead is nothing but MORE as the US and Qatar add more than 100mt per annum in capacity, more than all of Australia:
A wave of new supply of liquefied natural gas is set to hit global markets late this year, making 2024 potentially the last year of robust prices in one of Australia’s major export earners before a glut causes them to dive.
Coal is worse still. China is brimming with inventories and has just applied a massive import tariff.
Both LNG and coal prices can and will halve from here, all things equal:
This has swings and roundabouts for Australia.
The crash in gas is fantastic for the east coast economy so long as the export cartel passes through the prices, leading to big electricity bill relief.
The crash in oil is likewise taking pressure off households and will trigger interest rate cuts as inflation dies.
The crash in coal (and eventually iron ore) is not so good for the budget and will eventually lead to lower wages and higher taxes as nominal growth is hit.
Unless there is some severe escalation in the Middle East from skinnies in tinnies, global energy prices are about to wipe out inflation.
