Demand isn't to blame for crashing energy prices, and 'political oil' has led to massive supply that's kept crude cheap, former Goldman Sachs commodities chief says

• Low demand is not to blame for slumping oil prices, Jeff Currie said. 
• The former head of commodities research at Goldman Sachs says politics has kept oil supply high. 
• But with inflation falling, policymakers will refocus on green ambitions, potentially boosting oil prices.

Global demand for oil and other commodities hasn't slumped, contrary to some explanations for why crude prices have been falling for months. Instead, prices have crashed because governments shunned their own alternative energy policies to help boost supply and relieve pressure on consumers, former Goldman Sachs commodities research chief Jeff Currie said. 

"We overestimated the willingness of politicians in the West to pursue their political goals, being deglobalization, decarbonization, as well as redistribution policies," he said. "And because of that, we ended up with more supply."

Currie says that policymakers put less emphasis on sanctions in places such as China, allowing extra inflows of a million barrels per day of crude. That's on top of additional exports from Iran, Venezuela, and Russia. 

Governments were also less insistent on environmental policy, taking away curbs that could push prices higher. This led to record oil and coal consumption, as well as an uptick in deforestation to produce more food, Currie said. 

"Right now, the system created excess supply and put downward pressure on commodities," Currie said "We just got a lot more supply, political oil, you know, carbon based commodities. You got a lot more of those last year than what we thought we would get." 

But as inflation begins to come down, he expects lawmakers to do an about-face on both green policy and international regulation. Not doing so has already come at a cost, with Currie pointing to the recent Red Sea and Middle East tensions as a direct consequence of loosened sanctions.

As these policies resurface, they could become an important driver for the oil market moving forward. 

"By the way, it is the most investable space out there in the economy right now. The return on capital employed exceeds 20% in many parts of the world," Currie said, and added: "If this is the low point, then we're under invested going forward."

After oil prices peaked last September, crude has broadly slid lower. This was partially helped by massive crude output from non-OPEC producers such as the US, while some analysts also speculated that falling prices could be the result of global "demand destruction."