World primary energy demand is expected to increase sharply over the next two decades, even assuming that the objectives outlined in international and European agreements and commitments for environmental protection and waste reduction are fully achieved. Oil is set to remain a crucial weight in the mix of sources and the role of OPEC countries in meeting demand will be equally crucial. The energy hunger of emerging economies, primarily China and India, will continue to grow at a significant rate, increasing pressure on the markets.
On the other hand, the hydrocarbon sector continues to develop on inefficient foundations: as a non-market, linked to a pronounced phenomenon of financialisation and derivatives. Indeed, for oil, paper barrels are still traded, at paper prices, on opaque and unregulated platforms; the decisions of a full-blown cartel (OPEC) dominate, sudden political events of various kinds cause suffering and speculation creeps easily into the highly volatile prices.
This high volatility of oil prices has led, among other things, to heavy negative repercussions on investment choices in the oil sector and has given rise to an intense debate, both in consumer and producer countries, on possible initiatives to solve this phenomenon, having regard to the significant economic, political and social consequences of such marked price changes and so distant from the cost fundamentals.
Various initiatives and proposals have been put forward in order to remove the obstacles to creation of efficient, transparent and stable energy markets; this in the interest of both consumers and producers, favoring an adequate flow of investments in the oil industry and alternative energy sources, promoting the conditions for sustainable development. In this context, the longed-for and awaited single voice of the European Union should truly be heard. And in order not to limit ourselves to hoping for concrete initiatives without hypotheses, since 2010 we launched, as the Italian Energy Authority, a proposal for the creation, at least at the European level, of a real regulated crude oil market, which seeks to promote stability, transparency and efficiency of exchanges, which attempts to inoculate a little "market” in an industry that still remains a “not market“, exposed to volatility and unjustifiable speculation.
This EU initiative could take the form of the creation of a regulated platform for the negotiation of long-term standardized products, concerning the right to the physical delivery of lots of crude oil in Europe, guaranteed by a reliable central counterparty. In the proposed hypothesis, upon payment of a premium by the buyer for the purchase of this right, the seller would assume the obligation to physically deliver it at a predefined price. The benefits for the parties would be obvious: the producer would have immediate and certain financial resources to invest in; the buyer would enjoy the availability of a resource (oil) at a fixed price and a further economic advantage, if the price on the spot market at the time of delivery is higher than the contracted one.
In essence, it is about create a new regulated market and assign its management to a specific public institution, delegated by the EU itself to perform the functions of central counterparty and to provide the necessary guarantees, to allow for the negotiation of long-term products. Just in order to reduce the cost of guarantees, problem that prevents the development of very long-term markets (today Nymex and ICE do not trade products with a duration of more than 10 years), the public counterparty could provide, on the supply side, the minimum price guarantee to the seller of crude oil, from activate if spot oil prices are lower at expiration.
For Europe, this guarantee would only be burdensome in the case of particularly low prices, however, a particularly advantageous condition for the European economy; moreover, on the demand side, the public counterparty could provide a guarantee in favor of the buyer against the risk of insolvency of the seller. Since the seller himself would be required to demonstrate the availability of the product on the expiry date (based on credible investment plans or existing deposits), only the political risk of insolvency would be left to the public counterparty, since it has various political tools at its disposal to dissuade the manufacturer from contractual breaches not attributable to mere technical causes.
The development of this new regulated market would make it possible to support investments in new production, to send long-term price signals to the markets, useful for greater price stability; to reduce the riskiness of the sector and also lead to a reduction in production costs.
Europe, with a proactive spirit, similar to that assumed in the fight against climate change, could activate its own continental oil exchange, thus also promoting any similar and harmonizable initiatives elsewhere. With more than 500 million European consumers, the EU would support the opportunity to design a different oil market, less vulnerable to speculation, more transparent, with more protection in terms of price containment and returns on long-term investments.
