2023 – The Year of Luck or Longevity for Energy Markets?

Heading into this new year, many are worried about what tribulations will surface due to the threat of a global recession, continued European hostility, and new legislation impacting the energy markets. We just closed out a record volatile year coined by the Chinese zodiac as 2022, the year of the Tiger. RBN Energy famously makes yearly prognostications – and they are eerily accurate. What’s the prognosis for 2023?

Chinese zodiac sign Rabbit is predicted for 2023 as the year of quick, quiet, trustworthy, and likely to avoid a fight. The rabbit is also a sign of luck and longevity. After the volatile year we just closed out and the geopolitical issues flaring up, our industry could definitely use some luck. Don’t get too excited, though, because rabbits are known for being tricksters, so the luck or longevity question still lingers.

 

What to look for in 2023

Among U.S. crude oil exports in 2022, 60% began flowing out of Corpus Christi, more than double that of Houston and dwarfing that of Beaumont and Louisiana. Recently, two terminals out of Corpus, the Enbridge and South Texas Gateway, have carried the load because of their ability to carry a deep draft or Very Large Crude Carrier (VLCC). This volume is expected to continue to grow as the year goes on, as economies of scale will be recognized with VLCC routes versus the smaller carriers.

Canadian crude exports are also predicted to decrease in 2023. With the TransMountain Expansion Project coming online in 2023, the pipe’s capacity will increase from 300 Mb/d to 890 Mb/d, transporting mostly incremental heavy crude from Alberta to Burnaby, British Columbia. The US West Coast will be receiving some of this inventory, but the majority will move to Asia. When this happens, we can also expect to see a price increase as the spread between WTI and WCS narrows. This could mean higher prices for Midwest consumers, who are used to benefitting from Canada’s heavily discounted crude.

Last but not at all least, the energy transition will be a hot topic for 2023. Two new laws have been enacted that drastically increase government funding and tax credits for the switch to renewable energy sources. Among the billions of dollars provided by the Bipartisan Infrastructure Law are $8 billion for hydrogen hubs, $1.5 billion for additional hydrogen initiatives, $10 billion to advance carbon capture technologies, and billions more devoted to weatherization, smart power grids, nuclear and hydroelectric generation, and battery development.

One thing to keep in mind is that the need for affordable fuels is not going away. To meet the energy needs of a world that is more and more clean-focused, we need reliable and inexpensive alternatives to fossil fuels. As you prepare for the year ahead, ask yourself what your priorities are and how these new trends might impact your path to meet those goals.

Market Condition Report - Disclaimer
The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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