Capital Economy, Business and Finance
Chevron’s agreement to buy US oil operator Hess is another brush-off for experts predicting that fossil fuel demand will peak this decade. The $53 billion deal, which gives Chevron access to significant fields off the coast of Guyana and in North Dakota, follows a similar takeover by Exxon and is likely to catalyse a wave of consolidation in the industry driven by FOMO, higher interest rates and an extraordinary amount of free cash flow. The International Energy Agency quickly responded to the announcement by reiterating its prediction that oil demand will peak at 102 million barrels a day in the late 2020s, dependent on exponential sales of electric cars and a cooling of China’s economy. Chevron and Exxon are making a bet that won’t be the case, and that assets won’t end up stranded. Will European majors be tempted to take risks too?