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“We know fucking nothing more than anybody else does about oil prices.” So said Ryanair’s boss Michael O’Leary in his usual colourful manner at the European airline’s half-year earnings in November. Others have expressed similar sentiments over the years about how betting on the oil price is a fool’s game — although minus the swear words. Still, Lex bravely ventured forth last in January 2024 with a prediction that the days of $100 oil prices were over.
The logic was largely based on Chinese demand. Oil prices at $100 a barrel were not surprising in 2007 and 2011 given the explosive growth at the time in the Chinese economy. But the Chinese economy is changing — just take the continued strong expansion in electric vehicle car sales, for instance.
Of course, tensions in the Middle East have caused oil price spikes this year. Despite this, Brent crude prices are down about 3 per cent in the year to date. Persistent concerns over the strength of Chinese demand and other long-term macroeconomic factors have continued to largely override short-term gains to keep per-barrel prices stuck firmly in double-digit territory.
One sector that should have been easier to predict — but proved otherwise — was the renewable energy market.
The European offshore wind industry had experienced a year to forget in 2023. But Lex reckoned it could not possibly get any worse in 2024. Many of the problems that had afflicted the sector in 2023 appeared to be easing, such as supply chain inflation. Interest rates have come down. Governments and US states had — after some hesitation — acknowledged that prices agreed through contracts or auctions for the power eventually produced by new wind farms would have to rise if they wanted developers to still build.
Shares in Denmark’s Ørsted, which had a torrid end to 2023, had even gained nearly 10 per cent in the first 10 months of this year.
Then came the result of the US presidential election. That has sent investors in renewable energy stocks on both sides of the Atlantic into a tailspin as they fret over the future of the Inflation Reduction Act. Trump also threatened on the campaign trail to scrap offshore wind projects on “day one” of taking office.
At the moment, investors are still guessing as to what Trump can and will do. For instance, it may prove difficult to cancel the two US offshore wind projects Ørsted already has under way given federal permits have already been granted, reckons Bernstein. But even reduced prospects in the US will slow the renewable energy market’s recovery from what is now two pretty wild years.
nathalie.thomas@ft.com
