The End Of Peak Oil: One Analysts View.
Deutsche Bank is out with a well thought out and researched report on the future of the oil business. The financial times did a synopsis piece. Here is an excerpt with link {highlights mine.}.
Deutsche: the end is nigh for the Age of Oil
October 6, 2009 1:22pmby FT Energy Source
“This is the end of the 20th Century of Oil; we are entering the 21st Century of Electricity,” say analysts at Deutsche Bank in a major new report warning of high price volatility for both fuels as the leadership baton is passed.
“Obama’s environmental agenda, the bankruptcy of the US auto industry, the war in Iraq, and global oil supply challenges have dovetailed to spell the end of the oil era,” says Paul Sankey of Deutsche Bank.
Deutsche argues that “oil will never run out, rather we will become more efficient,” and predicts that hybrid and electric cars will have a far greater positive impact on oil efficiency than the market currently expects.
Deutsche’s analysis predicts that by 2020, global average MPG of newly purchased light vehicles will have increased by more than 50% compared to 2009, from roughly 29 mpg to about 44 mpg.“The impact will be concentrated in US gasoline, the largest single element of global oil demand (12%), and will be dramatic enough in its own right to cause the peak of global oil demand around 2016.....Deutsche also predicts that oil demand will be undermined by a switch to natural gas supplies........Deutsche also expects increasingly chronic under-investment in new oil supply capacity and forecasts that the peak for global oil production could arrive as early as withing the next six years.
The “concentration of remaining oil reserves into OPEC government hands will lead to under-investment in new supply and higher volatility in regulatory and fiscal regimes, and more volatile pricing. Consumer governments are adding to uncertainty with total lack of clarity on environmental legislation/regulation outcomes. That deep uncertainty in supply and demand will likely disincentivise private sector oil supply investment, exacerbating overall oil under-investment, and leading to peak oil supply within the next six years...
October 6, 2009 1:22pmby FT Energy Source
“This is the end of the 20th Century of Oil; we are entering the 21st Century of Electricity,” say analysts at Deutsche Bank in a major new report warning of high price volatility for both fuels as the leadership baton is passed.
“Obama’s environmental agenda, the bankruptcy of the US auto industry, the war in Iraq, and global oil supply challenges have dovetailed to spell the end of the oil era,” says Paul Sankey of Deutsche Bank.
Deutsche argues that “oil will never run out, rather we will become more efficient,” and predicts that hybrid and electric cars will have a far greater positive impact on oil efficiency than the market currently expects.
Deutsche’s analysis predicts that by 2020, global average MPG of newly purchased light vehicles will have increased by more than 50% compared to 2009, from roughly 29 mpg to about 44 mpg.“The impact will be concentrated in US gasoline, the largest single element of global oil demand (12%), and will be dramatic enough in its own right to cause the peak of global oil demand around 2016.....Deutsche also predicts that oil demand will be undermined by a switch to natural gas supplies........Deutsche also expects increasingly chronic under-investment in new oil supply capacity and forecasts that the peak for global oil production could arrive as early as withing the next six years.
The “concentration of remaining oil reserves into OPEC government hands will lead to under-investment in new supply and higher volatility in regulatory and fiscal regimes, and more volatile pricing. Consumer governments are adding to uncertainty with total lack of clarity on environmental legislation/regulation outcomes. That deep uncertainty in supply and demand will likely disincentivise private sector oil supply investment, exacerbating overall oil under-investment, and leading to peak oil supply within the next six years...
However, Deutsche also warns that a final upward price spiral will be required to break US oil consumption patterns and shift toward greater efficiency over the long term.“US demand is the key,” says Mr Sankey: ” It is the last market-priced, oil inefficient, major oil consumer.”
Deutsche predicts that oil prices could finally peak at $175/bbl in 2016 but will (then) be under fundamental long-term downward pressure.....
....“Beyond the the 2016 peak, Deutsche expects oil prices to fall and warns that the value of undeveloped resources such such as Canadian heavy oil sands, oil shales, and Brazilian pre-salt and other ultra-deepwater plays could be far lower than the market currently expects.
Deutsche expects relatively short-term, high capex flexibility oil projects to retain premium value.
“Companies that are relatively smaller, with lower costs of capital and stronger, more flexible managements should relatively outperform in a highly challenging world for corporate players. There will be a competitive advantage to those companies that are prepared to plan on high oil prices in the medium term, in our view. Most advantageous would be to access near-term existing supply rather than long-term resource. At this stage we believe a high oil price planning assumption will be a competitive advantage – but this changes beyond 2016.”
Deutsche also has a warning for oil refiners describing refining as “a twilight business that will struggle mightily in a world of ever declining gasoline demand.”
Deutsche predicts that oil prices could finally peak at $175/bbl in 2016 but will (then) be under fundamental long-term downward pressure.....
....“Beyond the the 2016 peak, Deutsche expects oil prices to fall and warns that the value of undeveloped resources such such as Canadian heavy oil sands, oil shales, and Brazilian pre-salt and other ultra-deepwater plays could be far lower than the market currently expects.
Deutsche expects relatively short-term, high capex flexibility oil projects to retain premium value.
“Companies that are relatively smaller, with lower costs of capital and stronger, more flexible managements should relatively outperform in a highly challenging world for corporate players. There will be a competitive advantage to those companies that are prepared to plan on high oil prices in the medium term, in our view. Most advantageous would be to access near-term existing supply rather than long-term resource. At this stage we believe a high oil price planning assumption will be a competitive advantage – but this changes beyond 2016.”
Deutsche also has a warning for oil refiners describing refining as “a twilight business that will struggle mightily in a world of ever declining gasoline demand.”
Link: http://blogs.ft.com/energy-source/2009/10/06/deutsche-the-end-is-nigh-for-the-age-of-oil/
Comment: I think hybrid & electrical cars are going to be a game changer as we go forward. I don't have to drive my car much and when I do it is usually 70% for business. I may put 7,000 miles a year on a car and fill it up twice a month. That's the advantage of living in a built up urban area. Millions of people are just like me. GM says its new Volt due to come out next year should get somewhere around 280 miles per gallon for people who drive in short burst trips like me. I'm not sure I buy that number but let's say it gets 100 miles per gallon. That means I'd fill up my car once every 4-6 months or so. Multiply me by millions and you can see where Deutsche Bank is coming from. I'm going to have more to say on this and the "Green Movement" at a later time. Suffice it to say though that this is a high impact and long term investable event which we hope to take advantage of for our clients.
*Long ETFs related to energy, clean energy, oil and gas exploration for client accounts.
*Long ETFs related to energy, clean energy, oil and gas exploration for client accounts.
posted by CR English at 6:37 AM
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