Oil is Headed Toward a Steep Dive

Investment Analysis Clubs Macro Economic Trends and Risks
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“It doesn’t look good at all for OPEC+ in 2025,” said Christof Ruehl, senior analyst at Columbia University’s Center on Global Energy Policy. “Everybody would agree that non-OPEC supply is strong enough to create a surplus in the market. And holding back supply now to keep prices up encourages that, of course.”

China, the engine of oil demand for the past two decades, is showing a diminished appetite for the commodity. Imports have dwindled to the weakest pace in almost two years as economic growth cools and top industry officials envisage a shift away from fossil fuels.

Muted global consumption growth will be outmatched more than 50% by the tide of new production from outside the 23-nation OPEC+ alliance, with 40% coming from the US, according to the IEA. While the nation’s shale boom has eased, it continues to provide substantial volumes of new supply.

The world could have a glut of oil by the end of the decade because of rising production combined with declining demand as consumers and businesses switch to electric vehicles and renewable energy, according to a new report from the International Energy Agency.

The International Energy Agency said Wednesday that the world’s total oil supply capacity is expected to rise to about 114 million barrels a day by 2030, which the group said would amount to “staggering” 8 million barrels a day beyond projected demand.

The above can mean US will have less interest in the Middle East. And economic & stability problems in oil producing states.

Riyadh needs prices close to $100 a barrel to fund the economic transformation plans of Crown Prince Mohammed bin Salman, which span futuristic cities and premium sports players, data from the International Monetary Fund indicate. The kingdom has been forced to scale back spending on flagship projects after a four-quarter economic slump.

If the OPEC+ strategy continues to struggle, the group could consider a more extreme alternative, Bank of America and BNP Paribas warn: ramping up production to claw back market share and squeeze out rivals like U.S. shale. Neither consider this the most probable scenario, but its likelihood may be rising.

Quite a change from the 1970’s.

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Perversely, when there’s an oil glut prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall. When prices fall people start using more oil. Then the glut dries up and prices rise. Then people stop using more oil ad prices fall.

And so on.

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Wow! The copy/paste is strong with this one. :rofl: :rofl:

Pete

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I believe the US gov’t will artificially keep oil prices up to maintain the transition to EV & hybrids. Likely not as high as the EU but maybe California pricing. They should IMO.
Yes consumers will bytch. The keeping of pricing high will hopefully keep the US from meddling in the Middle East; which has cost trillions! And facilitate the transition of the US passenger fleet.
Of course the US industrial base & airlines will still need oil. But likely the US can satisfy that demand domestically.

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China is 50%+ EV. Battery costs are coming down rapidly. All transports is going electric.

China is the biggest car market in the world.

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Hmm, maybe all the US has to do is allow the Ukrainians to destroy some Russian oil production. Kill two birds that way … weaken Russia and stabilize oil prices.

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I haven’t seen this in the statistics. In fact Oil demand is inelastic, if any. What changes is, when Oil prices decline, Oil companies are not making sufficient money to service the debt, and invest. Remember, you need to constantly invest in drilling new wells to maintain the supply.

This is the reason Oil business is boom and bust. Not because Oil demand goes up and down.

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:rofl: You went way over your 20 character minimum.

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How do you envision this being done?

DB2

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Oil demand will continue to fall from here on rapidly. China is leading the way with EVs (over 50%), Norway is 94%. 70% of oil is used in transportation.

Oil price will drop. More people buy EVs (and hybrids). Saudi’s will pump more. Oil price will drop.

It is inevitable.

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Can you delve into those numbers a little deeper? Particularly China.

Is 50 percent the ratio of EV’S to light vehicles sold last year. If so, is that number growing and at what rate? What
percent of fuel consumed in China is consumed by light vehicles?

In other words, how much will fuel demand in China drop each year going forward?

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I asked Chat GTP.

The reduction in China’s consumption of imported crude oil due to the rise of electric vehicles (EVs) is a complex calculation because it depends on several factors, including the share of oil used in transportation, the rate of EV adoption, and China’s reliance on imported oil. Here’s a more detailed look:

  1. Oil Consumption by Sector:

    • Transportation sector accounts for around 50-60% of China’s total oil demand, with light vehicles being a significant part of this.
    • Light vehicles (including cars, SUVs, and small trucks) consume about 25-30% of China’s total crude oil demand, as a significant portion is refined into gasoline and diesel.

  2. Impact of EV Adoption:

    • EVs directly replace vehicles powered by internal combustion engines (ICE), which reduces the demand for gasoline and diesel derived from crude oil. With EVs making up 50% of new vehicle sales, a substantial share of future light vehicle stock will be electric, gradually cutting fuel consumption.
    • Projected reductions in fuel demand: As EV adoption accelerates, fuel demand from light vehicles could fall by 2-3% per year in the short term, growing to more significant reductions (perhaps 15-20% cumulative over the next decade, depending on the adoption rate).

  3. China’s Imported Crude Oil:

    • China currently imports about 70-75% of its crude oil, making it one of the world’s largest oil importers. The transportation sector is a key driver of this demand.
    • With light vehicles accounting for about 25-30% of total crude oil consumption, as EV penetration grows, it will reduce the amount of oil needed to fuel the vehicle fleet. A 15-20% reduction in fuel demand from light vehicles over the next decade could result in a 5-10% decrease in China’s overall crude oil consumption, assuming other sectors like industry and freight don’t increase their oil demand.

  4. Reduction in Crude Oil Imports:

    • Given that China imports roughly 10-11 million barrels per day (bpd) of crude oil, a 5-10% drop in total oil demand over the next decade could reduce crude oil imports by around 500,000 to 1 million bpd. This figure is based on the gradual displacement of ICE vehicles by EVs.
    • Over a longer timeframe, if China continues to electrify its fleet, the reduction could be more substantial. A fully electrified light vehicle fleet by, say, 2040, could cut crude oil imports by several million barrels per day.

Summary:

  • The rise of EVs, making up 50% of new vehicle sales, will gradually reduce the consumption of fuel, potentially leading to a 5-10% reduction in China’s crude oil consumption over the next decade.
  • This translates into a potential reduction in crude oil imports of around 500,000 to 1 million barrels per day in the next 10 years.

It appears that it will only drop at best a million barrels a day per decade. Best I
can tell that is about 100,000 of barrels per day per year. It is likely that even the small 100,000 a barrel a day drop will have an impact on the price of oil.

Of course the new CATL Shenxing Plus battery might change this as its energy density and fast charging rate may make it useful for medium and heavy duty trucks. Note: The Shenxing Plus is not available in any automobiles at this
time. Also note my generous use of weasel words.

Cheers
Qazulight

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Let me remind you of Peak Oil as stated by BP.

Yea of little faith.

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These things are not linear.

It is like the internet adoption.
Slow, then pause, then maybe crash and reversal, then everything changes.

I suspect the same will happen with EV vs ICE.

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Increased gasoline taxation just as the EU does it.
Gasoline is relatively dirt cheap now.

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Not always true. Remember when oil prices were between $40 and $60 in 2015, 2016, 2018 and 2020.

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And no references for your numbers.

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It is possible, but there are two things standing in the way:

  1. No “killler app”. The Internet existed in government labs and in universities for at least a decade, probably two, before it became rapidly adopted by the masses. The killer apps were email and the browser. What will the killer app be for EV? Maybe efficiency, but that’s already here (my old nice 4-door ICE sedan got me 50 miles out of $10 of gasoline, and my new nice 4-door EV sedan gets me 250+ miles out of $10 of gasoline). Maybe connectivity? But ICE and EV can have similar connectivity. AV? Maybe. We shall see.
  2. Politics. The Internet had minimal politics involved when it took off. Nobody really thought they had to worry about it because it was a “toy”. A decade or two later, goodbye Sears, and retail took it on the chin in general. And meanwhile, all sorts of “brokers” are seeing their fees slowly dropping due to the Internet (what we call “tech” nowadays). Meanwhile, in places like Germany, where unions and their supportive parties have the most power, they are managing to slow EV adoption to a very meaningful extent. Similar in the USA, but different type of politics of course.
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It’s actually nothing like internet adoption. Before the internet there was “nothing”. There was nothing to “fade out” while new technology came in. The oil economy is baked into everything, from blast furnaces and aluminum smelting to transportation to plastics to other manufacturing and home heating. Oil is embeddded at almost every stage of our economy, which is why a stoppage is so unthinkable. (Think, although I just said not to, 1973, 1979, and other times when oil has gotten scarce.)

The internet wasn’t “replacing” something, it was brand new (to most people). Some things happen quickly, but other things don’t. Norway is an outlier because of incredibly heavy government involvement and incentives (not present here). To a lesser extent Sweden is on this path. Likewise China, which strictly limits the number of ICE cars that can be sold. It’s telling that those are the only three countries people cite when talking about EV adoption.

Other countries, including the US, see EV adoption growing, but not nearly at the rates of those three. Absent game changing technology (say, a new battery which doubles the mileage and charges anywhere, coupled with a complete management change in US manufacturers) the trend will continue. Yes, it will get bigger. No it won’t happen “all at once.”

BTW, even with the astonishing rate of 94% of new registrations being EV in Norway, they still comprise only 25% of the cars on the road. ICE cars last a long time, and people will use them.
Plug-in electric vehicles in Norway - Wikipedia.

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