Good morning; here's what the Oilman has for you today:

• Shale Exec Sparks Hope for Higher Oil Prices

• Miners Run into Labor Shortage

• Tweet of the Day

Shale Exec Sparks Hope for Higher Oil Prices

Oil prices have been a disaster lately, shrugging off OPEC’s additional cuts and any suggestions of strong demand.

But there’s still hope for oil bulls and producers, says Pioneer’s executive VP Beth McDonald.

A supply squeeze will push prices higher later this year.

It’s a seesaw, and it’s moving in the right direction

When demand for a commodity goes up, supply either goes up as well or prices push it up.

Demand for oil is well and growing, but supply isn’t.

It isn’t because producers are struggling with higher costs, says McDonald.

• Higher costs, in turn, pressure profit margins.

• Lower profit margins annoy shareholders.

• Annoyed shareholders want their dividends.

• Companies prioritize dividends overproduction.

All this can only mean one thing: higher prices.

A shock could be coming for oil markets

Right now, everyone’s getting depressed about recession.

• Germany’s in a recession. Officially.

• The eurozone is in a recession. Officially.

• U.S. manufacturing is in a recession. See above.

And that’s pushing oil prices lower…

…regardless of the supply situation.

Energy Aspects just revised down its oil price target for the second half of 2023, citing not just OPEC production cuts but U.S. production growth.

Yet here we have Pioneer’s VP telling us this growth is nothing to write home about.

Who do you believe? Take your pick.

But the Oilman’s thinking that the numbers speak for themselves.

Production growth is already slowing down. Demand isn’t.

It doesn’t take a finance degree to see how this will end.

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Miners Run into Labor Shortage

Mining companies are struggling to hire enough engineers, project managers, and truck drivers.

This has called into question the success of ambitious energy transition goals as it threatens raw material supply.

“If you can’t grow it, you have to mine it”

The energy transition depends entirely on sufficient amounts of commodities that come out of the ground.

Or the salt flats of Bolivia.

In any case, the raw materials for all those solar panels, wind turbines, and EV batteries need to come out of the ground.

Since we’re not that far ahead with automation and AI, this is still work done by people.

And there are not enough people to do it.

Because…

• Mining is not sexy and

• Students are not going into mining engineering

And because mining’s got a dirty reputation and people don’t want to work in it.

The struggle for miners is real.

Remind you of anything?

A similar shortage has stalled production growth in oil and gas as much as federal government policies in the last couple of years.

But wait, there’s more, and it’s expensive

With a labor shortage, miners cannot increase production.

Without increased production, supply of key raw materials will swing into a deficit.

With a deficit, the price tag of the transition will swell.

With a higher price tag, the transition planners would have to cough up more subsidies.

Here’s the kicker: will they keep the money-printing presses running, or will they raise taxes?

Or both?

This transition is looking like a train speeding toward a brick wall.

It’s a thick wall.

Around the Global Patch

🇹🇰 Tokyo responds: save energy, Japan!
🇮🇳 India sets record high fuel demand.
🇷🇺 Whitewashed Urals crude eases Russian economic contraction.

Tweet of the Day

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