One thing your analysis left out Fabio, is the sudden and rapid uptake of EVs. Sales of electric vehicles have surged world wide and show no sign of abating. We already have electric buses and I've read accounts of electric long haul trucks in the US.
Throw in developments in solar panels and battery storage, I doubt these folk will go back to fossil fuels.
That might drop a spanner into the machinery of the global economy.
David, great point. You're absolutely right that the EV transition is accelerating faster than most people realise. But will this drop a spanner in the machinery in the short to medium term? Possibly but I'm not sure.
The risk I'm highlighting is a physical shortage of crude right now, driven by critically low inventories and geopolitical disruptions like the Hormuz closure. EV adoption affects the demand side, but that's a multi-year shift. I don't think it solves the problem of what happens when there aren't enough barrels to satisfy immediate delivery contracts in the next few months. The futures market is signalling a "today problem".
Also, EV sales are growing but the infrastructure is still playing catch-up. In many parts of the world, the transition is being slowed by cost anxiety and policy reversals. Even in optimistic scenarios, the International Energy Agency projects oil demand to plateau, not collapse, and that plateau is still years away.
Global oil demand is roughly 100 million barrels per day, and EV adoption, even at record levels, is only displacing a small fraction of that. I don't think the math works for EVs to significantly reduce oil prices in the next year or so, especially when the supply side is under stress, but I might be wrong.
However, if EVs do accelerate much faster than expected, that would impact on (reduce) oil demand, and potentially force prices lower. But I think that would only happen after a recession or a major economic adjustment. In other words, it would align perfectly with the "lower rates and stimulus" scenario I described. Bottom line for me: the financial system is still wired to the old energy paradigm, and the transition itself is creating volatility.
Thanks again for the comment. Would love to hear your thoughts on where you see the EV transition having the biggest impact between now and the next 2 or 3 years.
'What solves the problem of what happens when there aren't enough barrels to satisfy immediate delivery contracts in the next few months?' Having an alternative to turn to and the drop in price of P.V systems and batteries would seem to fit the bill.
And yes the infrastructure is still playing catch-up, but it seems to be winning. Prof. Jeffery Sachs is presently taking part in a 15,000 klm trip along the Silk Road in a BYD EV, and it is now possible to drive around Australia's' coastal highway network without having to stress about finding a charging station, so change is coming and it will only accelerate in the coming future. The Corporations can't hold back the tide.
My thoughts? Personal transport will play a significant part if only because personal costs, but I think a big return is possible from electrifying bulk road transport, or switching to rail and having local distribution by EVs.
Perhaps I've read too many science fiction novels' but if, or when this happens the oil market will contract ( Wall st. with it ) and the petrodollar will collapse.
This is my honest view: if Cushing storage hits the operational floor next week, and the front-month contract is desperate for barrels today, no amount of BYDs on the Silk Road changes that. The physical oil market is a just-in-time system which therefore doesn't wait for infrastructure to catch up. And yes, you're right, infrastructure is winning, but that win is still measured in years. Here we're still talking about global oil demand of 100 million barrels a day. EVs are displacing a fraction of that, and will continue to do so incrementally. So I think the contraction you describe will happen, but it's a decades-long process, not a weeks/months-long one. I think the petrodollar collapse is a real conversation, and if it happens, it won't be because EVs killed oil demand overnight, but because the financialised system built on oil futures and derivatives finally breaks under its own weight (and there's potential for the "mother of all short squeezes" on oil right as we speak). Thanks for this chat, a great counterargument. I agree overall but I think the timescale matters.
The whole of the western neoliberal economy is a just in time system which is unable to respond quickly to the sort of disruption we are now witnessing.
I personally think the petrodollar will collapse first along with the Amerikan empire, thanks to the growth of BRICS and their campaign for de-dollarisation and that will drive the expansion of electrification across all sectors. Not the other way round.
China has shown the world that the transformation can happen rapidly.
The change will be difficult and painful for some, but I might be a bit more optimistic on this - about the only thing I do feel optimistic about in today's world.
And thank you also for a polite and respectful discussion.
One thing your analysis left out Fabio, is the sudden and rapid uptake of EVs. Sales of electric vehicles have surged world wide and show no sign of abating. We already have electric buses and I've read accounts of electric long haul trucks in the US.
Throw in developments in solar panels and battery storage, I doubt these folk will go back to fossil fuels.
That might drop a spanner into the machinery of the global economy.
David, great point. You're absolutely right that the EV transition is accelerating faster than most people realise. But will this drop a spanner in the machinery in the short to medium term? Possibly but I'm not sure.
The risk I'm highlighting is a physical shortage of crude right now, driven by critically low inventories and geopolitical disruptions like the Hormuz closure. EV adoption affects the demand side, but that's a multi-year shift. I don't think it solves the problem of what happens when there aren't enough barrels to satisfy immediate delivery contracts in the next few months. The futures market is signalling a "today problem".
Also, EV sales are growing but the infrastructure is still playing catch-up. In many parts of the world, the transition is being slowed by cost anxiety and policy reversals. Even in optimistic scenarios, the International Energy Agency projects oil demand to plateau, not collapse, and that plateau is still years away.
Global oil demand is roughly 100 million barrels per day, and EV adoption, even at record levels, is only displacing a small fraction of that. I don't think the math works for EVs to significantly reduce oil prices in the next year or so, especially when the supply side is under stress, but I might be wrong.
However, if EVs do accelerate much faster than expected, that would impact on (reduce) oil demand, and potentially force prices lower. But I think that would only happen after a recession or a major economic adjustment. In other words, it would align perfectly with the "lower rates and stimulus" scenario I described. Bottom line for me: the financial system is still wired to the old energy paradigm, and the transition itself is creating volatility.
Thanks again for the comment. Would love to hear your thoughts on where you see the EV transition having the biggest impact between now and the next 2 or 3 years.
'What solves the problem of what happens when there aren't enough barrels to satisfy immediate delivery contracts in the next few months?' Having an alternative to turn to and the drop in price of P.V systems and batteries would seem to fit the bill.
And yes the infrastructure is still playing catch-up, but it seems to be winning. Prof. Jeffery Sachs is presently taking part in a 15,000 klm trip along the Silk Road in a BYD EV, and it is now possible to drive around Australia's' coastal highway network without having to stress about finding a charging station, so change is coming and it will only accelerate in the coming future. The Corporations can't hold back the tide.
My thoughts? Personal transport will play a significant part if only because personal costs, but I think a big return is possible from electrifying bulk road transport, or switching to rail and having local distribution by EVs.
Perhaps I've read too many science fiction novels' but if, or when this happens the oil market will contract ( Wall st. with it ) and the petrodollar will collapse.
I'm not economist, but I have read history books.
This is my honest view: if Cushing storage hits the operational floor next week, and the front-month contract is desperate for barrels today, no amount of BYDs on the Silk Road changes that. The physical oil market is a just-in-time system which therefore doesn't wait for infrastructure to catch up. And yes, you're right, infrastructure is winning, but that win is still measured in years. Here we're still talking about global oil demand of 100 million barrels a day. EVs are displacing a fraction of that, and will continue to do so incrementally. So I think the contraction you describe will happen, but it's a decades-long process, not a weeks/months-long one. I think the petrodollar collapse is a real conversation, and if it happens, it won't be because EVs killed oil demand overnight, but because the financialised system built on oil futures and derivatives finally breaks under its own weight (and there's potential for the "mother of all short squeezes" on oil right as we speak). Thanks for this chat, a great counterargument. I agree overall but I think the timescale matters.
The whole of the western neoliberal economy is a just in time system which is unable to respond quickly to the sort of disruption we are now witnessing.
I personally think the petrodollar will collapse first along with the Amerikan empire, thanks to the growth of BRICS and their campaign for de-dollarisation and that will drive the expansion of electrification across all sectors. Not the other way round.
China has shown the world that the transformation can happen rapidly.
The change will be difficult and painful for some, but I might be a bit more optimistic on this - about the only thing I do feel optimistic about in today's world.
And thank you also for a polite and respectful discussion.
Cheers, Dave