Renewable Oil Prices - While we're all talking about sustainable energy solutions, ESG investing, electric vehicles, etc., don't forget that oil prices just got renewed to a 7-year high. Sure, alternative energy solutions are well on their way, but for now, oil keeps the throne.
And based on the state of the world and energy markets right now, this really shouldn't come as a surprise. The International Energy Agency announced in their monthly report on the oil market that in 2022, we're likely to be even more crude-hungry now than we were prior to the pandemic. Energy traders and oil companies are psyched, but I heard Greta Thunberg hasn't gotten out of bed since the news broke.
Driving this demand uptick, the IEA says, is a combination of geopolitical tensions and far fewer government-mandated COVID restrictions this year than in the past two years. Oil demand is closely linked to things like global transportation needs. Back in the dog days of the pandemic, there wasn't a whole lot of flying or driving long distances going on. Hence crude prices were literally going negative for a brief moment in April of 2020. Now that we're largely back to business as usual, oil demand is back.
But, prices for WTI crude are at a 7-year high, not a 2-year high. That's where the geopolitical tensions come in. Like middle schoolers at a dance, energy-producing countries tend to be awkward around each other, especially those with vastly different ideologies, leading some to barely ever interact with members of the opposite group. Right now, tensions in Europe and the Middle East primarily are leading to concerns that global supply could fall, with most fears stemming from Russia and the UAE. Falling supply meeting rising demand can only mean one thing: price go boom.
Wall Street Does What Wall Street Does - If there is one thing Wall Street firms are known for, it's paying themselves a whole lot of money. That's changed over the past few years, but not in any way to turn around that high-flying reputation.
Earnings releases for the U.S.'s largest banks flooded last week and spilled over into this week as well. Almost across the board, earnings fell on account of drastic increases in operational expenses. What drove those cost increases, you ask? Well, salaries.
According to the analysis done by the Wall Street Journal, salaries didn't just increase; they mooned. Citigroup reportedly handed out an extra $2.9bn in total compensation last year while J.P. Morgan increased compensation by $3.6bn, and Goldman Sachs laughed at how poor its peers were, shelling out over $4.4bn in additional compensation compared to 2020. To anyone working at those firms, congrats on the fat bag.
Reasons for the spike in pay are mixed but stem from a similar cause. Financial markets across the board have been going ape sh*t for the past two years, leading to rapid growth in these firms' lines of business like loan origination, mergers and acquisitions, trading, advisory, the whole gambit. To keep up with skyrocketing demand for their services, these firms had to hire a host of fresh talent and pay them handsomely to keep them on board.
And don't expect it to slow down anytime soon. While deal volume may slow compared to the record-setting years 2020 and 2021, the name of the game going forward is talent retention. There's not a whole lot of loyalty on Wall Street, so you better pay up.