Updated on April 23 to add two charts.
Big oil is losing its grip on the auto industry; and, perhaps more interestingly, the recent drop in oil prices is at least partly the result of demand destruction rather than simply being a supply issue; according to analysts at Bloomberg New Energy Finance (BNEF).
A number of recent presentations by BNEF analysts went over many of the finer points and specifics of these assertions, providing some interesting insights (imo). A nice break from watching the US “pat itself on the back for the riches flowing from fracking wells” — those are Reed Lamberg’s words over at Bloomberg Business, if you’re wondering.
As far as the link between the fossil fuel industry and the auto industry weakening — much of this is simply the result of low-emissions cars gaining ground on conventional ones, according to the analysts. (I have my doubts that this is the only major cause. It seems that declining rates of ‘economic prosperity’ and resource availability are playing into this fall in oil demand as well.)
Either way, though, the future of transportation is set to look very different than it does now.
“Where we are is in an age of plenty,” stated Michael Liebreich, BNEF’s founder. “We have cheap oil, cheap gas, cheap renewables. You do have an abundance of supply in a way you haven’t had for decades. We also are in an age of competition.”
As the very interesting graph below shows, oil demand has more or less flatlined over the last decade — even as higher levels of supply resulting from the fracking boom have materialized. The peak in oil demand occurred back in 2004, and has fallen a good deal since then.
Part of this decrease in demand is — according to BNEF — the result of improving efficiency with regards to fuel use by the transportation sector; the vehicles on the roads nowadays simply use less fuel than older models over the same distance traveled.
“This is a global phenomenon,” Liebreich noted, also referencing the fact that the London-based research group doesn’t expect crude prices to rebound very rapidly. With electric vehicle sales starting to take off (still not representing a large portion of the overall auto market, though) further decreases in demand can be expected, presumably.
There’s actually quite a bit more interesting information in Bloomberg’s coverage. Those interested are recommended to head here.
Image Credits: BNEF
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