Energy expert warns of ‘serious oil crisis’ within next five years

Maglan Capital president David Tawil also weighs in on the broader inflationary picture

Maglan Capital President David Tawil argued on "Mornings with Maria" on Thursday that "with respect to oil supply, the rush for the exit doors is getting really serious" amid "strong demand" with the reopening of economies, which could soon lead to "a serious oil crisis in this world." 

The energy expert has been bullish on oil for the past couple of months, and told "Mornings with Maria" in June that he expects oil prices to hit $100 per barrel before the end of 2021. On Thursday, he told host Maria Bartiromo that he believes his projection still holds true, adding that it will happen sooner rather than later. 

A number of investment banks, including Goldman Sachs, have also warned that oil prices could top $100 a barrel next year. 

On Thursday morning, West Texas Intermediate crude oil, the U.S. benchmark, was unchanged at $70.30 a barrel. The contract rose $2.88 the day before to $70.30. 

Brent crude, used to price international oils, added 25 cents to $72.48 per barrel. It advanced $2.88 the previous session to $72.23.

Earlier this month, oil prices surged to their highest level in more than six years

On July 6, WTI climbed by as much as $1.82 to $76.98 a barrel, the highest since November 2014, before paring its gains. Brent crude oil, the international standard, neared $78 a barrel for the first time since October 2018. Both energy components reversed into negative territory later in the session. 

The Biden administration’s push for clean energy has many investment firms moving toward environmental, social governance and corporate investing and away from fossil fuels, leaving limited capital for discovering new oil. 

Tawil argued that oil is "somewhat on a boost beyond inflation because of the supply-demand imbalance that’s going to be there for the short and medium-term." 

Ticker Security Last Change Change %
USO UNITED STATES OIL FUND L.P. 49.47 -0.20 -0.40%
USL UNITED STS 12 MONTH OIL FD LP UNIT BEN INT 25.40 -0.11 -0.43%

He went on to say that he doesn’t believe the COVID-19 Delta variant "is going to slow things down," especially in the Western World and in developed economies. 

Tawil said he believes economies and businesses will continue to reopen following the restrictions imposed by the coronavirus pandemic, travel will continue to pick up and productivity will continue to rise, and therefore, "there’s going to be a strong demand."

He then explained the oil supply picture, pointing out that companies are rushing for the "exit doors." 

Tawil pointed to global miner BHP Group’s consideration to get out of oil and gas in a multibillion-dollar exit as it looks to expedite its transition away from fossil fuels, Reuters reported on Tuesday, citing Bloomberg News, which attributed people familiar with the matter.

He also pointed to a court ruling calling for Royal Dutch Shell plc to reduce its carbon emissions at a faster pace. 

On Tuesday, the oil major confirmed it would appeal against the Dutch court ruling, arguing that the company was being unfairly singled out, The Wall Street Journal reported. 

The May verdict highlighted the growing pressure from governments, investors and environmentalists on oil companies to take drastic measures to reduce emissions.  

SURGING INFLATION COULD DERAIL ECONOMIC RECOVERY FROM PANDEMIC, IMF WARNS

Tawil stressed that because "the majors are running away from carbon emissions for a number of reasons," there will be a "serious" global oil crisis in three years to five years. 

Tawil made the comments three days after President Biden said that Congress needs to pass his sweeping economic agenda in order to tamp down rising inflation amid concerns that another burst of government spending act as an accelerant to already rapidly rising consumer prices.

Biden acknowledged on Monday that there have been "some price increases," but he pushed back against fears of persistent inflation and maintained his stance the recent surge in consumer prices is temporary. 

Tawil told Bartiromo he "absolutely" disagrees with Biden’s view on inflation, citing information from earnings calls, large public manufacturers and other factors. 

He stressed that he believes inflation is "here to stay." 

Tawil made the comments a little more than a week after it was revealed that U.S. consumer prices rose last month at the fastest pace since August 2008.

The Labor Department said on July 13 that prices rose 5.4% year over year with prices trending higher every month this year. Analysts surveyed by Refinitiv were expecting prices to rise 4.9% annually.

The annual data has a "base effects" skew due to the decline in prices that occurred at the start of the pandemic. 

According to the department, the consumer price index rose 0.9% in June, faster than the 0.6% increase in May. Analysts surveyed by Refinitiv were expecting a 0.5% gain.

Used car prices spiked 10.5% last month, accounting for more than one-third of the increase. Additionally, energy prices climbed 1.5% month over month and food prices rose 0.8%.

CONSUMER PRICES SURGE 5% ANNUALLY, MOST SINCE AUGUST 2008

"Wage inflation is certainly not keeping pace with the inflation for big-ticket items," Tawil said on Thursday, pointing to durable goods such as cars. 

"Automobiles don’t exist in terms of availability," Tawil added. "Yes, there are supply chain issues, but frankly when people are paying higher prices for used cars than their original sticker price, and they’re not collectibles, we are in a serious inflationary environment." 

Automakers have been struggling to make up production lost during the coronavirus lockdowns last year due to an ongoing semiconductor chip shortage that has seen incomplete vehicles being built and stored until the chips become available.

General Motors has even taken the step to remove several fuel efficiency features from its full-size trucks to stretch its supply of chips across more of its most profitable vehicles.

The Manheim used car index hit 203 in May, which represents a 48.2% increase over last year. 

The overall average price for vehicles was $20,260 while light-duty pickups hit $30,590.

However, Manheim noted that in the first 15 days of July, wholesale used vehicle prices decreased 1.7% compared to the month of June, which brought its Used Vehicle Value Index to 196.9, a 24.7% increase from the year before. 

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"I don’t care how high the minimum wage goes, within reason frankly John Doe is not going to be able to go ahead and keep up with rising prices and so, therefore, I do think that we’re going to hit a wall and not very far into the future," Tawil said. 

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FOX Business’ Catie Perry, Megan Henney, Jonathan Garber and Gary Gastelu contributed to this report.