Crude Oil is the number one traded commodity in the world. Consumption in the twentieth and twenty-first centuries has been abundantly pushed by automobile growth; the 1985–2003 oil glut even fueled the sales of low economy vehicles in OECD countries. The 2008 economic crisis seems to have had some impact on the sales of such vehicles; still, the 2008 oil consumption shows a small increase. In 2016 however Goldman Sachs predicts lower demand due to emerging economies concerns, especially China. The BRICS (Brasil, Russia, India, China, South Africa) countries might also kick in, as China briefly was the first automobile market in December 2009. The immediate outlook still hints upwards. In the long term, uncertainties linger; the OPEC believes that the OECD countries will push low consumption policies at some point in the future; when that happens, it will definitely curb oil sales, and both OPEC and EIA kept lowering their 2020 consumption estimates during the past 5 years. Oil products are more and more in competition with alternative sources, mainly coal and natural gas, both cheaper sources. Production will also face an increasingly complex situation; while OPEC countries still have large reserves at low production prices, newly found reservoirs often lead to higher prices; offshore giants such as Tupi, Guara and Tiber demand high investments and ever-increasing technological abilities. Subsalt reservoirs such as Tupi were unknown in the twentieth century, mainly because the industry was unable to probe them. Enhanced Oil Recovery (EOR) techniques (example: DaQing, China ) will continue to play a major role in increasing the world’s recoverable oil. The reach of available petroleum ressources has always been around 35 years or even less since the start of the modern exploration. The oil constant, a insider pun in the German industry refers to that effect.
Michael Liebreich, the founder of Bloomberg New Energy Finance, predicts a peak in 2025 and decline in the 2030s. Liebreich pointed out in a press interview that “the orthodoxy of ‘rampant growth’ has turned into ‘less rampant growth’ and actually now, ‘not very rampant growth’ at all.” Bloomberg New Energy Finance estimates that plug-in cars will displace 13 million barrels of oil a day by 2040. Fitch Ratings reported that battery technologies used by electric cars could trigger a “death spiral” for investors with stocks linked to crude oil.
“For the first time, oil companies have to think seriously about the future,” Alastair Syme, an oil analyst at Citigroup Inc. told Bloomberg in London.
A World Energy Council report underlines that if rapid improvements continue in renewable energy, electric vehicles, and other energy technologies, petroleum consumption will peak in 2030 and start decline rapidly thereafter.
The plunging cost of renewable energy – with solar modules costing 50 percent less since 2009 – is already upending the business model of utilities. Disruption could spread to the oil industry as electric vehicles become more economic than gasoline or diesel cars, potentially displacing millions of barrels of daily fuel use in the next ten years. Projections for decades of demand growth that underpin investments in oil projects could be misplaced, the report underlined.
“Given the advances in battery technology, by 2030 carbon-powered vehicles will be the exception rather than the norm. This will inevitably impact on oil demand,” Alex Blein, London-based energy portfolio manager at Amundi told the press. The United States has tapped into their oil reserves with the intention of using it now before demand more it is almost nil. If you own oil securities, now is the time to sell before the gas stations close.