Suncor Energy Inc. T.SU

More on Global Oil Demand Going Forward

[MigraineCall]

I found these statistics interesting, which prompts me to take a look back in the rear view mirror, and question if there will be a rapid demise of oil due to changes in types of transportation fuel.

Over the last 10 years, we have spent 3.8 Trillion USD on renewables globally.

Fossil fuels went from 82% to 81% of the global energy share.

However...

Over the same 10 year period, global oil consumption went from 89.8 mm bpd in 2012,  to 99.4 mm bpd in 2022. This includes the major hit due to the pandemic.

What is happening now?

In December 2022 while China was kept under lockdown, and during low seasonal demand, and many people working from home, we hit a new record for global oil consumption. 

I dig and I look, but still see no change in current data regarding any reduction in demand to lead me to believe this historical trend of increasing absolute oil demand will not continue, although it's percentage of total energy demand may decrease, even accounting for realistic practical rates of adoption of renewables in a partial energy transition.

As we consume oil, we deplete our current reserves all across the planet, we are not coming forward fast enough with capital investment to replace these reserves at a rate to meet current global demand, let alone meet for future demand growth.

China inventories are now down by 40mm bbls while we focus on the data that the west is higher by about the same amount.

On the supply side, rig counts are still dropping, as are Frac Spreads, and DUCs. Generally there is a 4-5 month lag in rig counts after oil price changes, setting us up for a taller spike if it turns.

US Shale earnings have been disappointing, due to declining production, well productivity, depletion, and higher costs. Wells are getting more gassy, producing less oil and more gas requiring more flaring as there is not enough pipelines to take the new gas.

Iraq's largest West Qurna field is going to be down from mid Feb 20 till early March, .4mm bpd.

Equador oil production is down for a few weeks taking off .5mm bpd., bridge and pipeline collapse.

WCS diffs are tightening, now just over $16.

Russian crude production will be down about .5mm bpd, and going forward without western specialist expertise and equipment, will have trouble maintaining production going forward.

US SPR has been pillaged.

So what would the oil price be like in a few years if demand exceeds supply?
Where is geopolitical risk priced in to oil now?
With Iran nearing critical enrichment completion levels, just how close to ME energy infrastructure and oil tankers will the next war be waged?

For me, I am very comfortable at this time in the cycle while NA inventories have been high, and oil and product prices are still low, to get into and hold a core position in Canadian heavy producers.

[Experienced]

Great post as usual.. You have put your finger on the biggest issue facing longer term investment in oil stocks. Which trend line is going to be greater? Demand destruction or supply destruction. I guess the difference between us can be boiled down to the fact that you think it will be supply destruction and I think it will be demand destruction. The interesting thing about this is Econ 101.

[nukester]

I think the debate between supply or demand destruction misses a critical point. The topic of future energy consumption is improperly being framed as a transition. As if energy consumption is a zero sum game that requires a loser for every winner. Viewing future energy use as a transition is an overly simplistic paradigm that will lead to below average investment returns. Humanity is in fact

[MigraineCall]

I totally agree. The 'energy transition', is misnomer. It is more like an 'energy addition' to ever increasing global energy demand, but with a higher electrical and renewable component. We will need all forms, and soon. It requires a massive replacement and build out of new electrical infrastructure, only possible by the increased use of fossil fuels in mines and power plants

[meritmat]

I think it will come to a point that if we dont develope it, somebody will develope it for us 

[GingerEnergy111]

Just had the discussion yesterday about the diversity of Canadian electrical production.  Quebec vs Alberta is stunningly different. Great post! MC for Prime Minister! :)

[Experienced]

Call me thick my friend but I don't see how the fact that China and SE Asia are building coal fired plants presents an argument that the world will need more oil.

[MigraineCall]

No, more coal fired plants do not directly increase oil consumption, that wasn't the point I was trying to make. As is often the case in Asia, it is far more important for one to give the appearance that you are doing something on the surface, instead of actually doing what truly makes a difference. It exposes China's hypocrisy that they are claiming to be champions of climate

[GingerEnergy111]

Interesting and I believe correct!  Simple and that is what people don't always see....posters here notwithstanding... :)

[Obscure1]

Great points as usual. Here are some counter points just for fun: * as the Shorts were crushing the price of Tesla shares last December, the spoon fed media was fueling a demand destruction narrative for EV's....I spent a fair amount of time over the Xmas to New Years holiday telling friends and family that the narrative was a hoax and to load up on Tesla which has made a number of people in