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Re: Oil-When Will EV Adoption Cause Peak Oil Demand?

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KAOBOY MUSINGS and its associated podcast KAOS THEORY focus on the intersection of Financial Markets, Macroeconomics and Geopolitics. I've spent 30+ years as a trader/hedge fund manager and now manage money for my family office across many asset classes.
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Re: Oil-When Will EV Adoption Cause Peak Oil Demand?

Although this will eventually happen, to paraphrase Mark Twain, "The reports of the death of hydrocarbons are greatly exaggerated."

Michael Kao
Apr 22, 2021
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Re: Oil-When Will EV Adoption Cause Peak Oil Demand?

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First, the short-term picture for oil demand. Pre-COVID, we were at ~100 mmbpd. Currently, we're at 95 mm bpd. YE21 we will be at ~98 mm bpd; YE22 we will be at 102 mm bpd.

Here are some predictions for global EV penetration, courtesy of Capital One: 5.8% for '23, 11% for '25, 26% for '30, 57% for '40. EV unlikely to materially impact gasoline demand until 2025-2030.

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China leads the world in EV penetration, but even they have fallen short of expectations. China will likely be at 6% by YE21 vs. previous expectations of 8%. China expects to be at 18% by '25.

OPEC+ understands that it needs to maintain a delicate balance between revenue maximization without runaway oil prices that will only accelerate the substitution trend. BUT they can do this only insofar as they have spare capacity.

At current demand levels of 95 mmbpd and current OPEC+ spare capacity levels of 10 mmbpd, OPEC+ runs out of spare capacity when world demand hits 105 mmbpd. This is likely to happen by '24.

Shale is going to have a hard time bridging the gap this time around, given the confluence of 1) higher breakevens due to best inventory gone, 2) antagonistic regulation, 3) still fragmented industry, 4) capital scarcity/discipline.

Pre-COVID, US production peaked at 13 mmbpd. Even at $70 WTI, US Shale will be struggling to breach 12 mmbpd (1 mmbpd below Jan’20 peak).

Given current decline rates, the US needs to replenish a Permian basin's worth of production EVERY YEAR just to stay even on the treadmill.

Meanwhile, Non-OPEC+/Non-US supply has flatlined. These sources of supply are typically long-cycle, with 4-7 year gestation periods.

Remember those precious few milliseconds of "US Energy Independence"? Cherish them well, because I think we may have seen the nadir.

END OF ORIGINAL THREAD.

Additions:

Very interesting. Underscores my point about the imminent death of ICE cars being a bit premature.

Twitter avatar for @staunovo
Giovanni Staunovo🛢 @staunovo
1 in 5 electric vehicle owners in California switched back to gas because charging their cars is a hassle, new research shows #OOTT
businessinsider.com1 in 5 electric vehicle owners in California switched back to gas because charging their cars is a hassle, research showsRoughly 20% of electric vehicle owners in California replaced their cars with gas ones, a recent study shows.
5:13 PM ∙ Apr 30, 2021
240Likes82Retweets

Yes, gasoline prices are increasing, but so are other input costs. Too often, the EV/ESG utopian vision rests upon selective focus on benefits with selective disregard of negative externalities.

https://www.autoweek.com/news/green-cars/a36363666/tesla-raises-model-3-and-model-y-prices-yet-again/

Here’s a great article that Mark Mills wrote on the EXTERNALITIES of EVs which tend to get ignored in the greater climate change/ESG debate.

https://techcrunch-com.cdn.ampproject.org/c/s/techcrunch.com/2021/08/22/the-tough-calculus-of-emissions-and-the-future-of-evs/amp/

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