Energy markets may see more supply crunches as demand grows: Dan Yergin

There’s a disconnect in the energy market, and it could lead to future supply shortages, Daniel Yergin, vice chairman of IHS Markit, told CNBC.

International oil companies are under pressure to cut investments in traditional energy production at a time when demand for oil is growing — and that’s leading to a “preemptive underinvestment” in supply, Yergin told CNBC’s “Capital Connection” on Monday at the Abu Dhabi International Petroleum Exhibition and Conference.

He called it a disconnect between the “realities of the dynamics of the market” and the policies that are being implemented.

Oil producers are “clearly not investing enough” because investors want them to be more careful and exercise capital discipline, he added.

On the other hand, “world demand is going to be back where it was in 2019 in the next few months, and … demand will continue to grow, so you will need investment,” he said.

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We need to find a new balance between the United States and China. That’s the single most important issue in international affairs today.

Daniel Yergin

Vice chairman, IHS Markit

“I think we should be conscious that one of the things we may see is a series of crunches,” he said.

U.S. crude futures are up 68% and international benchmark Brent crude gained 60% so far this year as demand jumped due to economies reopening and loosening pandemic restrictions.

Balance in the U.S.-China relationship

Climate change will unfold over 30 years, but the relationship between Washington and Beijing is an “immediate issue” that is seeing tensions “bubbling up,” Yergin said.

U.S. President Joe Biden and Chinese President Xi Jinping are set to hold a virtual summit on Monday.

“We need to find a new balance between the United States and China,” Yergin said. “That’s the single most important issue in international affairs today.”

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