Global oil consumption will eventually hit a maximum point and then decline as alternative energy sources take over. But it still looks like this is going to be far in the future. A post about energy density of the various fuels will be very useful.
Thank you very sincerely. You are of course correct, I was thinking in terms of leveling or declining energy requirements...Have you read anything by Peter Zeihan? It, and some of his earlier books, call for a much quicker reduction in global populations, and in some cases regional reductions (think China and much of Europe) already under way.
Thank you. In my view your question is what will ultimately cause energy demand, carbon emissions, etc. to level off. Post 2050, pop growth could well slow appreciably and even turn demand. There is a great book called "Empty Planet" from a year or two ago that highlights this issue.
Great chart comparing the IEA's OMR to OPEC's MMOR. Interesting that the IEA's predictions are closer to the mark, at least for the period you looked at (as opposed to the coming years). 2024 looks like an acid test, it will be interesting.
Thanks Arjun, always appreciate your perspective. Home charging has many advantages, especially if done when asleep. Yes I thinks it's natural to think about your own objectives in isolation, forgetting about the knock-on effects or that other countries have different priorities.
In the words of a sage in the Caddyshack movie...: "...become one with the ball,Arjun....see the ball,Arjun...become one with the ball..." Your handicap will fall like a Niagara surge after the rainy season.
I agree with much of what you say about EV's. It's not possible to apply past performance on EV's in countries where adoption is high and say that it will be replicated everywhere. Path dependency, individual incentives, and local geography matter a great deal. That's why the US is only at 8.1% of new sales, far short of the 18.1% average for 20 countries at the same point on the adoption curve.
I do think analysts need to be mindful of not allowing ones perception of how EVs fare in your own country colouring their view of adoption elsewhere in the world. For example, although Europe remains at the centre of EV adoption some of the fastest growth is happening elsewhere. EV adoption in Thailand only passed the 5% threshold in Q1 2023, but by the end of the year it had already reached 13%.
I think people focus too narrowly on EV sales as a measure of progress. Analysis by the World Bank suggests that governments would have made a lot more progress if they had invested in EV charging infrastructure than subsidising EV ticket prices. The global EV charging stock increased by more than 40% in 2023, and it seems governments are positioning supporting more charging infrastructure so this growth should continue to accelerate.
A final point on the impact on gasoline/diesel demand. The launch of EU ETS II, Europe's second carbon market (on road transportation and buildings) could result in reduced fuel demand. The carbon price is expected to be very high, perhaps €200 per tonne, and the only real way of abatement will be via EV growth.
Peter, thank you for your comment and great to hear from you! I might try to address some of these points in a future post as there is a lot I agree with and will help further clarify my views.
I agree that progress on charging is one of the most important areas policy and market forces could help. In my view, there is too much focus on effectively trying to replicate the gas station model via fast charging. I'd say the #1 thing that could be done in rich countries is to incentivize build out of home and office charging options. I hate going to public chargers personally. I LOVE charging at home and if I still went to an office, would like to be able to charge there. If we are destined to have subsidies/tax breaks, I would allocate the $$$ in that direction rather than giving the affluent breaks on expensive cars.
My main point on EVs and really most new energies is that the starting point is detracting from a 250 million b/d oil demand TAM...seems like just about everyone uses 103 (or 100 or 105) as their starting point from which they deduct EV impacts.
On oil demand, not just for EVs but with a number of variables, fuel economy gains most notably, there are simply very few that ever try to reconcile promises or even actual gains with actual oil demand. This seems to be happening with EVs where the quantlity of supposed oil demand displaced seems to be meaningfully overstated already.
In the US and Europe in particular, I also think not enough people view energy from the lens of developing word economic needs as the over-arching driver of future demand...they instead usually start by counting CO2. I understand why. I just don't think we will solve our emissions challenges without first solving how to make everyone rich. There will be huge overlap between economic growth and decarbonization, driven by geopolitical security imperatives.
It’s truly remarkable how large the gap is between reality and the vague assumption held by millions of people that some kind of miraculous “cure for oil use” will arrive “pretty soon now”.
Derek, that is exactly the point that always stops me in our track. We are really, really far off from everyone enjoying the lifestyles the vast bulk of us take for granted. It really is mind-blowing and upsetting if you spend more than a few minutes thinking about it.
Many, many thanks for so much important evidence packed into one piece. I don't trust any other analyst to present unbiased data on whether EV penetration is impacting oil demand. Your check of the relative accuracy of IEA and OPEC oil reports reminds me why.
Andrew, thank you very much...always appreciate your support! I would say that it is definitely worth following a broad range of analysts. For example, on the Street I value the research of GS (Daan, Callum, Yulia, Neil), JPM Commodities (Natasha), and MS (Martijn Rats). Among consultants, I follow Bob McNally of Rapidan...I don't get Rystad research but like Lars Eirik Nicolaisen. Rob West of ThunderSaid is outstanding. I am forgetting a bunch of people.
Arjun, the thanks are all mine. I do follow many of those people/agencies, plus Japanese sources etc, but no one so aptly contextualizes the 1.4 billion club issue as you do. All the best, Andrew
As always pointing out the real facts and the elephant in the room mostly ignored that the other 7+ billion want to improve their lives with affordable access to energy. CGEP does great work but I have yet to see this adequately addressed.
Thank you Michael. My issue with everyone that is especially focused on addressing climate is that I never hear how we are going to get to everyone being "rich".
I made this chart a week ago and the order might have changed since then. Anyway, Petrobras' ($PBR.A) 3-year total return, from April 16, 2021 to April 19, 2024, is higher than those of all embers of magnificent 7. During the same period, $XOM also beat every member but $NVDA.
Thank you again Arjun. Excellent work. It seems that many golfers forget about the “having fun” part of golf. Life is too short to confuse playing a round of golf with friends with practicing for the U.S. Open.
Global oil consumption will eventually hit a maximum point and then decline as alternative energy sources take over. But it still looks like this is going to be far in the future. A post about energy density of the various fuels will be very useful.
thank you Investment Journey for your comment and suggestion.
Thank you very sincerely. You are of course correct, I was thinking in terms of leveling or declining energy requirements...Have you read anything by Peter Zeihan? It, and some of his earlier books, call for a much quicker reduction in global populations, and in some cases regional reductions (think China and much of Europe) already under way.
I am a big Zeihan fan. Have read his 1st 3 books...with his latest on my "to read" list. And I subscribe to his great daily YouTube videos.
Great article, with 1 question: Are we sure population continues to rise?
Thank you. In my view your question is what will ultimately cause energy demand, carbon emissions, etc. to level off. Post 2050, pop growth could well slow appreciably and even turn demand. There is a great book called "Empty Planet" from a year or two ago that highlights this issue.
Arjun,
Great article, lots to ruminate on there. I am a Houston guy as well. If you want to play golf some time, let me know.
Great chart comparing the IEA's OMR to OPEC's MMOR. Interesting that the IEA's predictions are closer to the mark, at least for the period you looked at (as opposed to the coming years). 2024 looks like an acid test, it will be interesting.
Thank you Investor!
Thanks Arjun, always appreciate your perspective. Home charging has many advantages, especially if done when asleep. Yes I thinks it's natural to think about your own objectives in isolation, forgetting about the knock-on effects or that other countries have different priorities.
In the words of a sage in the Caddyshack movie...: "...become one with the ball,Arjun....see the ball,Arjun...become one with the ball..." Your handicap will fall like a Niagara surge after the rainy season.
LOL Charles and wise words!!!
I agree with much of what you say about EV's. It's not possible to apply past performance on EV's in countries where adoption is high and say that it will be replicated everywhere. Path dependency, individual incentives, and local geography matter a great deal. That's why the US is only at 8.1% of new sales, far short of the 18.1% average for 20 countries at the same point on the adoption curve.
I do think analysts need to be mindful of not allowing ones perception of how EVs fare in your own country colouring their view of adoption elsewhere in the world. For example, although Europe remains at the centre of EV adoption some of the fastest growth is happening elsewhere. EV adoption in Thailand only passed the 5% threshold in Q1 2023, but by the end of the year it had already reached 13%.
I think people focus too narrowly on EV sales as a measure of progress. Analysis by the World Bank suggests that governments would have made a lot more progress if they had invested in EV charging infrastructure than subsidising EV ticket prices. The global EV charging stock increased by more than 40% in 2023, and it seems governments are positioning supporting more charging infrastructure so this growth should continue to accelerate.
A final point on the impact on gasoline/diesel demand. The launch of EU ETS II, Europe's second carbon market (on road transportation and buildings) could result in reduced fuel demand. The carbon price is expected to be very high, perhaps €200 per tonne, and the only real way of abatement will be via EV growth.
Peter, thank you for your comment and great to hear from you! I might try to address some of these points in a future post as there is a lot I agree with and will help further clarify my views.
I agree that progress on charging is one of the most important areas policy and market forces could help. In my view, there is too much focus on effectively trying to replicate the gas station model via fast charging. I'd say the #1 thing that could be done in rich countries is to incentivize build out of home and office charging options. I hate going to public chargers personally. I LOVE charging at home and if I still went to an office, would like to be able to charge there. If we are destined to have subsidies/tax breaks, I would allocate the $$$ in that direction rather than giving the affluent breaks on expensive cars.
My main point on EVs and really most new energies is that the starting point is detracting from a 250 million b/d oil demand TAM...seems like just about everyone uses 103 (or 100 or 105) as their starting point from which they deduct EV impacts.
On oil demand, not just for EVs but with a number of variables, fuel economy gains most notably, there are simply very few that ever try to reconcile promises or even actual gains with actual oil demand. This seems to be happening with EVs where the quantlity of supposed oil demand displaced seems to be meaningfully overstated already.
In the US and Europe in particular, I also think not enough people view energy from the lens of developing word economic needs as the over-arching driver of future demand...they instead usually start by counting CO2. I understand why. I just don't think we will solve our emissions challenges without first solving how to make everyone rich. There will be huge overlap between economic growth and decarbonization, driven by geopolitical security imperatives.
Thanks. Great post as usual.
It’s truly remarkable how large the gap is between reality and the vague assumption held by millions of people that some kind of miraculous “cure for oil use” will arrive “pretty soon now”.
Derek, that is exactly the point that always stops me in our track. We are really, really far off from everyone enjoying the lifestyles the vast bulk of us take for granted. It really is mind-blowing and upsetting if you spend more than a few minutes thinking about it.
Many, many thanks for so much important evidence packed into one piece. I don't trust any other analyst to present unbiased data on whether EV penetration is impacting oil demand. Your check of the relative accuracy of IEA and OPEC oil reports reminds me why.
Andrew, thank you very much...always appreciate your support! I would say that it is definitely worth following a broad range of analysts. For example, on the Street I value the research of GS (Daan, Callum, Yulia, Neil), JPM Commodities (Natasha), and MS (Martijn Rats). Among consultants, I follow Bob McNally of Rapidan...I don't get Rystad research but like Lars Eirik Nicolaisen. Rob West of ThunderSaid is outstanding. I am forgetting a bunch of people.
Arjun, the thanks are all mine. I do follow many of those people/agencies, plus Japanese sources etc, but no one so aptly contextualizes the 1.4 billion club issue as you do. All the best, Andrew
As always pointing out the real facts and the elephant in the room mostly ignored that the other 7+ billion want to improve their lives with affordable access to energy. CGEP does great work but I have yet to see this adequately addressed.
Thank you Michael. My issue with everyone that is especially focused on addressing climate is that I never hear how we are going to get to everyone being "rich".
Fantastic article - really concise and important to remind us to read data carefully and take our own considerations.
Thank you Natan...definitely people should draw their own conclusions!
Such a good point on the (lazy) usual geographical extrapolation of S-curves. Terrific note as usual Arjun.
Thanks so much Blind Squirrel!
I made this chart a week ago and the order might have changed since then. Anyway, Petrobras' ($PBR.A) 3-year total return, from April 16, 2021 to April 19, 2024, is higher than those of all embers of magnificent 7. During the same period, $XOM also beat every member but $NVDA.
https://pbs.twimg.com/media/GLjebKrbsAAgLWC?format=jpg&name=4096x4096
that is remarkable. had not realized that. Used to cover PBR back in the day.
Thank you again Arjun. Excellent work. It seems that many golfers forget about the “having fun” part of golf. Life is too short to confuse playing a round of golf with friends with practicing for the U.S. Open.
thank you Martin! and fully agree on the fun part. I am surprised at how may 4-25 handicappers there are that act as if the pro tour is the next stop.
excellent
thank you angel!