The Energy Report 11/13/19

Peak Demand

It was not too long ago when people were freaked out about oil. The word was that the world was running out of oil! The world would soon hit so-called “peak oil”,  a point in time when the maximum rate of extraction of petroleum would be reached, after which it was expected to enter terminal decline. Freak out!

We were told our only choice to save us from that terrible fate was to move to alternative fuels. In fact in 2006, the International Energy Agency (IEA), said that conventional crude oil production had peaked. In a 2013 report, they said that peak oil, “appears probable before 2030”, and that there was a “significant risk” that it would occur before 2020. But a funny thing happened on our way to peak oil, the shale revolution came along. Now because of the shale revolution the world may have more oil and natural gas then it will need.

In fact, according to the latest International Energy Agency World Outlook released today, global oil DEMAND will hit a peak around 2030. Not peak oil production but peak demand. The IEA reported that the use of more efficient cars and electric vehicles will end an expansion in oil demand that dominated the past century.

Yet once again these predictions of so-called peak oil and now peak demand fail to consider the power of the marketplace. I never believed in peak oil because, despite the fact that everyone was telling us that we faced doom and gloom if we did not find a way to get off oil, I knew that as the price got high enough, the market would figure out a way, Now with all the fears about climate change and predictions that the world might end unless we go to alternatives, has a familiar ring. Before the threat was peak oil. Now peak demand. The common thread is that we need alternatives to save the planet. Well peak demand thinking is as flawed as peak oil. Electric cars, as nice as they are, still require a lot of energy to build and then charge them not to mention the impact on the environment from the production and eventually disposal of millions of car batteries. So as I told my peak oil friends decades ago, don’t lose any sleep over peak oil. And now I tell you do not lose sleep over peak demand.

In the short-term oil is stuck in a rut but in a quiet uptrend since bottoming below $51.00 dollars a barrel. President Trump, at the Economic Club of New York failed to offer any new insight into U.S./China trade. Still, the market is starting to realize that perhaps the talk of a recession was overblown and many now have to raise their forecast once again for the U.S. and global oil demand. That means that we should be buying breaks as refiners have to ramp up to meet growing demand.

API tonight. We’re looking for draws across the board!

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In case you missed it! Phil’s guest appearance on the McKeany-Flavell Hot Commodity Podcast last Friday, September 20th talking about current energy market dynamics. LISTEN HERE!

Phil Flynn

The PRICE Futures Group

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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