David Dismukes: An exceptionally uncertain time for energy markets

(The Associated Press) Drone attacks sparked fires at two Saudi Aramco oil facilities in September 2019. Yemen's Iran-aligned Huthi rebels claimed responsibility.

The last decade has completely changed the way most analysts look at energy markets. In the past, and particularly throughout the two decades prior to the shale revolution, geopolitical impacts drove market outcomes. While fundamentals were important, geopolitical events served as important inflection points relative to market trends starting in the early 1970s and continuing until the Arab Spring of 2010.

David Dismukes, LSU Center for Energy Studies

Geopolitical events have certainly not gone away, but their impacts on global energy supplies and prices have been considerably softened, in very large part due to the U.S. shale revolution. Unconventional development has vaulted U.S. crude oil production to the top of the world leaderboard and, along with Russian supplies, has considerably increased the level and diversity of non-OPEC (and non-Middle Eastern) energy supplies around the globe.

Without a doubt, the increase in non-OPEC supply diversity is one of the reasons why the importance of these geopolitical events, and the resulting price volatility that usually follows, have diminished. However, geopolitical events occurring over the past summer and fall of this year reminds markets that the Middle East is still an important part of world energy markets, regardless of the shale revolution.

Read David Dismukes full column.