After an energetic introduction from Professor Craig Calhoun (LSE Director), Ian Taylor (Vitol CEO) took to the stage to discuss the company and the recent trends in the oil market.
Taylor describes Vitol as a physical commodity trader, which involves the buying, storing, transporting and selling of commodities. A hint of boyish excitement is exhibited as he appears genuinely excited about his work, and even manages to slip in a joke about Madonna falling over at the Brit Awards the previous night. He explains the physical aspect differentiates them from other commodity traders as Taylor voices his dislike of staring at a computer screen and ‘betting on oil prices’. He describes it as nothing more than gambling, and not a business he wants to be a part of.
Discussion turns to how oil prices are truly determined by supply and demand, regardless of press coverage about market frictions. The overproduction of oil has led to excess supply in the oil market and hence the price is driven down. This is partly down to an increase in efficiency over the past few years. Another important contributor to an increasing supply is the increase in oil extraction methods such as fracking. Taylor predicts the oversupply issue to continue throughout 2015 however he is also expecting a significant increase in oil demand, compared to 2014.
In Venezuela, it’s cheaper to fill up your car with petrol than buy a glass of water.
Conversation progresses to discuss the impact of taxation and subsidisation in the oil market, where a clear disapproval of subsidies is displayed. Taylor explains that in countries such as Venezuela and Saudi Arabia, where petrol is subsidised, it is cheaper for the public to fill up their car than to have a glass of water. Initially one thought this was a ludicrous over-exaggeration. I knew petrol was cheap, but surely not that cheap? However, some googling discovered that in fact in Venezuela, petrol prices are $0.015 a litre where a litre of bottled water costs close to $4. Shockingly, it’s not an over exaggeration at all. In contrast, the UK taxes petrol. Taylor claims that changes in oil prices only affect 20% of the price we pay at the pumps due to our high fuel duties, and as consumers we are affected far less by oil price fluctuations. Oil exporters like Saudi Arabia and Venezuela are far more economically affected. The presentation ends on another increasingly important commodity – natural gas. Taylor shows a fondness towards natural gas, as a cleaner energy alternative. He predicts a strong future in the market but insists gas will never be as fungible as oil.
An interactive question and answer session with the audience raises some interesting points. A question on alternative energy, with emphasis on wind farms is posed, to which Taylor responds, “wind drives me mad!” Is it surprising an oil CEO dislikes renewable energy sources? Not really. He describes it as both “inefficient” and a “scandal”.
“If a price can be generated without a government subsidy, the method would have my full support” he explains. Taylor voices affection towards nuclear power, now the disposal of waste is safe. Nuclear is also efficient and clean in the long run. He also reveals he is pro-fracking – as long as it is done sensibly and safely. When quizzed on China’s energy production, Taylor explains that China has a huge coal industry as coal is the cheapest fuel for power generation, but also the dirtiest. He describes his visits to industrial Chinese cities as unpleasant and refers to the cities as “nasty”.
When an audience member asks whether he would support a tax on coal emissions Taylor shows support, however he highlights the potential logistical problems, displaying a level of annoyance at politicians for “screwing up” the emissions trading scheme in the EU. Unfortunately the session is brought to an end, a round of applause is issued and Taylor exits the stage.
Personally, I found Taylor’s content and personality the perfect introduction to the Forum. He was engaging and entertaining, whilst still informative and educating. The following speakers had a lot to live up to.