Sept 2921: Energy

We must prepare for higher for longer crude, diesel and gasoline price for two reasons.  One is that demand (i) is shifting higher post Covid as world slowly returns to normal, (ii) substitution from higher priced coal, natural gas & electricity encroaches.  Two is lack of supply growth prognosis as (i) world is still in hangover mode post two-year ago energy collapse with companies having chosen to focus on cost cutting instead of exploration, (ii) fear by would be investment suitors that government push into green trumps desire to shift resources in ways that would’ve been shifted during past energy bulls.  Know that OPEC doesn’t have enough spare unused capacity to be the game changing crude oil fix, rather is incremental and viewed to be a random moment to justify a correction.

This looks to be a classic case of too high too long creating too low too long, that now is at risk of rolling too high too long.  Same as the fertilizer discussion in that if supply is incapable of being the main source for short term fix, then recalibration requires demand changing behavior.

This has many trickle-down impacts to farming operations and even biodiesel.  Research has been done on this.  Please call or send an email for more detail or anything else you see in the analysis page.

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Urea Prices on the Rise

As measured by the port of New Orleans Louisiana (NOLA), urea prices are up about US $70 per short ton since the New Year.  Reasons include better than expected demand in India and abroad due to strong commodity prices, and disrupted supply, some logistical, some political and some linked to limited anticipatory planning to have larger scale production program in place for deferred shipping slots.  Canadian retail prices are adjusting.

This can get fixed by summer but unlikely prior to the North American spring application time.  I just completed a couple reports on this.  Shoot me an email if would like more depth.

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