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Hello, go back to the energy source and come to you from London today.
This week we’ll be looking at big moments as Germany changes its nuclear tone. But first, stock up on oil prices.
So far, the major oil companies have claimed they can handle lower prices after a 15% drop in April. Only ENI, an Italian energy major, has so far published revised assumptions of its finances based on a price of $65 per barrel. Others all tie the framework to a $70 price per barrel, waiting to see what happens next.
The bad news is that while prices bounced back last week, most analysts believe the market will be falling for the rest of the year and next year and beyond. In fact, the forward curve of benchmark Brent crude oil does not show prices that have risen above one barrel until 2028.
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Economic fallout from the US-China trade war is blamed on price declines, but the bigger factor could be OPEC. The Saudi-led oil cartel appears to be determined to bring more crude to the market, even if demand for it is uncertain.
How low will the price be? Goldman Sachs believes Brent will be $60 for the rest of the year and $56 next year. If OPEC continues pumping and the global economy slows down, Goldman believes it could reach $40 a barrel next year.
How will this affect large oils? Perhaps the most exposed BP to prices, modelled its finances at $70 this year and $71.50 next year. A decrease of $1 per barrel will still reduce pre-tax operating profit by about $340 million. At Exxonmobil, a dollar difference affects $650 million each.
The German shift means nuclear power
One of the most read stories in 2019 Monday was news that Germany was changing its nuclear stance.
“This will be a change in policy that will change the ocean,” said a German official. The new government has dropped years of opposition to the EU’s nuclear expansion.
Germany, which phased out its own nuclear power plant in 2023, has been heavily debated against nuclear power, which is treated as low-carbon energy equivalent to wind and solar.
As one of the EU’s most powerful voices, Germany’s anti-nuclear stance has hampered funding and political will for new nuclear projects across the bloc. Germany is also supporting the World Bank’s ban on financing nuclear projects, an approach other development banks follow.
But the new German Prime Minister Friedrich Merz has shown he has a more practical view, saying that the country’s decision to shut down nuclear power plants in the past was a “significant strategic mistake” and exposed it to high prices of imported gas.
The new government is currently considering building a small modular reactor and debating whether it could take part in the French nuclear defense shield.
“European countries seeking to develop nuclear power will have less opposition from Germany,” said Jonathan Cobb, a senior policy expert at the World Nuclear Association. “The number of countries supporting nuclear power has switched quite a lot last year compared to countries that are opposed to nuclear,” he added.
Cobb said that as Germany and other European countries are changing their positions on nuclear power, World Bank President Ajay Banga will also help drive changes regarding the ban on nuclear funding.
In the EU, Cobb said that the policy that previously referred to renewables as a way to increase low-carbon energy could also be mentioned in nuclear power. Future G7 conferences could potentially address nuclear weapons in the same discussion as other low-carbon technologies. (Malcolm Moore)
power point
The energy source has been written and edited by Jamie Smith, Martha Muir, Alexandra White, Tom Wilson and Malcolm Moore, with the support of FT’s global team of reporters. Contact us at Energy.source@ft.com and follow us on X at @ftenergy. Check out previous editions of our newsletter here.
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