On this page we will post much shorter pieces on the business of energy – a mixture of original content and brief analyses of interesting articles from elsewhere.

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February 2017 –  Gasoline Evaporates and China Converts

US Gasoline Evaporates

US gasoline demand is down around 4-5% in 2017, prompting scratched heads all round. How come, when there is not a whiff of recession? The post here was picked up by Bloomberg Gadfly, and Zero Hedge for discussion.

Its a big deal given US gasoline make up about 45% of global demand as has been growing robustly over the past few years supporting oil demand.

A possible answer may be that US gasoline demand may in fact be the aggregate result of two forces: long-term structural decline due to demographics and urbanisation  – see here – and the more recent phenomenon of SUV purchases, lower retail prices and stronger economy pushing demand back upwards.

As prices have moved upward by 20% over the past few months, and car purchasing may be saturated, it could be the longer-term trend,masked for a couple of years, is showing through again.

If correct, then this would explain a) the downturn in demand, and b) why gasoline demand may not be as not strongly correlated with the health of the general economy as supposed.

If the long term trend does begin to take hold, then a solid element of oil consumption will have been removed, pushing oil toward a demand peak.

China’s Conversion – A Path Less Taken

China is moving ahead with a Fiver Year Plan (FYP) that is likely to fundamentally change the future path of its energy consumption. If it achieves its targets, it will have started to rapidly remove its dependence on internal coal consumption, and import reliance on gas and oil.

A chart summarising this is shown below – over 50% of China’s new generating capacity out to 2020 could be provided by solar, and 100% by non-fossil fuel energy sources. Demand for coal and gas has tended toward zero.

A world of detail and complexity lies beneath these numbers – but there you have it. The post here provides more detail.

January 2017 – “Supply Dwarfs Demand”

BP’s annual Energy Outlook is a solid, although orthodox industry analysis. However, this year it give a lot more airplay to alternative (downside) scenarios to the standard upward and onward projections of never-ending energy consumption. Its analysis of EV usage suggests oil demand could fall steeply between now and 2035 for example.

But its most striking image is this one – the recognition that the world has over 2.5trillion barrels of technically and economically viable oil reserves, but future demand out to 2050 of less than half of that. BP thus expects the big three reserve-holders and producers (OPEC / Russia  / USA) to increase output to dominate market share and maximise reserves value. Interesting counter-point to oil bulls.

Also released in the last few days has been this work by analysts Carbon Tracker on future demand for oil, gas and coal. A long note, it basically highlights that peak demand for three fossil fuels will come quicker than expected because the costs of solar,  wind and EV batteries have constantly been lower than forecasted. The power of the global manufacturing curve now turned toward major energy production.

Carbon Tracker’s gas and oil projections could well be right, but be wary of coal. China and India are both clearly pivoting toward a dual strategy of coal and renewables as the foundations of their future energy strategies – an issue which will be explored in detail in a post on the site in February.

Finally, Bloomberg New Energy’s Top 10 predictions for 2017 are always worth a read. One of them, renewables as baseload for power generation is counter-intuitive, surprising – and almost certainly correct.

And one more thought – EVs will almost certainly reduce oil demand in the long run, but in the short run, note how US miles travelled per annum and fuel efficiency are global outliers (see charts). As global transport expands, its growth is going to look a lot different, and less gasoline-hungry than before – even before EVs kick-in. See posts on the main site.


December 2016

A short piece from Bloomberg Gadfly on the rapid changes in global energy systems ahead – including a contribution from this site