Good thoughtful piece here, and to my eyes, factually accurate.
As I’ve posted here, China’s oil demand may be peaking right now, some years earlier than predictions of not long ago. Additionally, China’s exports of affordable, very capable EVs are destroying demand in the developing world.
US producers, while robust in recent years, rely, according to this, on a relatively high price for oil, which may not be sustainable in light of mounting oil surpluses globally.
The Wall Street Journal recently reported that the oil tycoons who supported Donald Trump’s campaign were not thinking of a “Drill Baby Drill” future. They know that raising production will crash prices, profits, and their stock holdings.
The game, according to the Journal, is “shoring up demand for their products—not pumping more fossil fuels, which they have little incentive to do.”
The MAGA faithful, who were told gas prices would drop in half on day one, will be disappointed in the short term.
In the longer term, gas prices may come down as global, but may bring a lot of American Industry and jobs down with them.
Video Description:
The cost to produce a barrel of oil is far higher in North America and Europe, than across oil-producing countries in the Middle East, and Russia. And for oil producers in the United States to make profits on new wells, oil prices need to average over $70 per barrel for the lifetime of the well.
Global oil demand, however, is now falling, and oil producers are pumping a million barrels of surplus oil, every single day, at current prices. Oil analysts expect oil prices to fall well below $70 a barrel over the next two years.
Driving prices lower is collapsing oil demand from China. Households in China prefer electric vehicles to gasoline-fueled cars, and Chinese carmakers export EV’s to dozens of countries, wrecking oil demand across the world.
The new BRICS bloc will be supplied by friendly sources in Russia, the Middle East, and Africa, where producers can still make profits at ever-lower price points compared to companies in North America or Europe.
It’s been a while since I was obsessive about oil data regarding the other version of peak oil (peak supply rather than peak demand), but there has always been three major failing points regarding that – one, incomplete data due to hidden industry practices and other reasons (this guy mentions that up front), two, outright lying about the data (which Russia and Middle Eastern countries do on a regular basis), and three, a general failure to account for improving technologies regarding extraction costs (and output capability) in the future. Just because it cost so much to extract oil in 2015 doesn’t mean it will cost the same in 2030.
Falling oil demand will happen, and should happen relatively soon, thanks in large part to Chinese EVs, although it won’t happen for the next year or two. This is OPEC, IEA says the same, argue about it if wanted, but it’s probably not far off:
OPEC sticks to 2025, 2026 global oil demand growth forecasts – https://www.reuters.com/markets/commodities/opec-sticks-2025-2026-global-oil-demand-growth-forecasts-2025-02-12/
The video poster seems to indicate that Russia and the Middle East won’t suffer from low oil prices, but I seriously wouldn’t bet on that. The last I saw (admittedly been a while), countries like Saudi Arabia NEED high oil prices to maintain their national budgets. I’m almost certain Russia is the same and it’s gotten worse since Ukraine. Even if their extraction costs are much lower that here, which I’m skeptical about because of lying and fudging their data, they’ll suffer plenty.
But, the market is never a straight line. There will be sudden falls in prices, which will last a while, then sudden rises, as the market drops production to catch up to lower demand. The falls in price will result in some increased demand (think of all the F-150 drivers in the US driving more because gas gets cheaper), the rises will result in higher EV adoption. But some permanent crash of the entire oil industry because we’ve hit true global peak demand? That’s a fantasy. It won’t happen. The best rule to consider is that if a resource is needed in an economy, it will be extracted and used – no matter what the costs are – and oil demand isn’t going to suddenly go away, only a future of ever rising oil demand is going away.
A decline in demand for gasoline will probably drive up the price of other distilates because the cost of getting crude out of the ground won’t change.
The US fracking boom started ~2008 and reached 51% of production by 2015, when the lateral drilling technology boosted output over older tech.
https://www.eia.gov/todayinenergy/detail.php?id=25372
AIUI, individual fracked wells have higher overhead to maintain production and enough of them are such marginal producers that they are very price-sensitive.
https://www.arescotx.com/og-education-resources/oil-and-gas-quickfacts/2013-2023-us-field-production-crude-oil-thousand-bpd/
Related – Republicans want the IEA to stop predicting peak oil:
https://www.eenews.net/articles/republicans-want-iea-to-stop-predicting-peak-oil/
Which, after the appalling ignorance of that, is hilarious.
“The world actually uses more oil than they imagine, and the supply is short.”
Golly, Mr. Mills, maybe you should share your fact-based data with the IEA, so they’ll get it right.
Drillers will find work in the deep geothermal industry. This is good.
Sadly, natgas still has the false aura of being “clean” while being as bad as, if not worse than, the GHG contribution of other fossil fuels.