Oil Traders, Supermajors Diverge On Demand Forecasts | OilPrice.com
This is a good overview of how there is a divergence of outlook on oil demand within the oil industry. I think the author and others are starting to get pervasiveness of technology's assault on oil demand.
There is a veritable race for more efficient, cheaper, greener solutions for every single segment of the energy. Given the sheer amount of innovation that is going on across the world with the ultimate aim to dethrone oil as the king of energy, chances are that the challenges for the oil and gas industry are indeed significant. The sooner everyone acknowledges them, the better.
The basic mistake many have been making is to focus on a single threat and then to downplay that threat in terms of limited scope in displacing oil. For example, EV is often synonymous with a small passenger vehicle that happens to be electric. Well, as a narrow segment, this is only small fraction of oil demand at risk, easily dismissed. But when you recognize that the same battery packs, drive units and other tech in the Model 3 will also flow into the Semi and achieve compelling economics, then you realize that the threat is much, much bigger than anyone in the industry expected. Moreover, it is much harder to predict just how slowly uptake of EVs will be when the technology is creeping into every transportation segment in land, sky and sea. Some segments will see faster growth than other, and this difference is likely to be driven more by the relative economics of it than regulation. Simply put, regulators are not taking a comprehensive approach to all the ways batteries can displace fuel. So any analysis that leans on policy will be limited to the scope that politicians have in mind, and that is way too limited.
But the scope is even bigger than just batteries. As the author correctly observes, there is a technology race for every segment of energy. Demand erosions is happening at all fronts and from multiple, competing technologies. Competition will even force technologies that use oil to be become more efficient. For example, competition from battery electric semis will force diesel and diesel hybrid semis to become more fuel efficient. Also CNG and LNG enter the mix too to deliver cleaner and lower fuel cost per mile. Either way, they will become more efficient so as to remain competitive longer or they will be replace faster by BE semis. So the nature of competition is to drive off oil demand faster through all competing technologies than any one technology could displace oil on its own. The diesel cost per mile will have to fall either through higher MPG or lower price per gallon. Either way, volume or price, the total revenue from diesel must retreat as competition advances on all fronts.
I think once OPEC is forced to recognize the full scope of technological encroachment on oil markets, it will need to change its strategy. The one thing that feeds all these competing technologies is a high price for oil. The relative market power of OPEC was high when oil was the only game in town. But relative to all markets where technology competes (which is all markets), OPEC has just a tiny sliver of market share. Thus, it really does not have the market power it used to have. Without market power, OPEC will need to accept competitive market pricing for oil, not oligopoly pricing. In a truly competitive market, you do not gain any economic advantage from withholding supply to push up prices. OPEC is losing market to a broad spectrum of technologies. Pump-at-will may actually be the most economical strategy for the long term. This would keep prices at a minimum, which in turn would minimize the investments made into competing technologies. All out production is the only way to slow the encroachment of technology. I doubt that OPEC will see the wisdom of this anytime soon.
