Peak demand? More like a supply crisis propelling oil to US$100 – by Eric Nuttall (Financial Post – May 12, 2021)

Eric Nuttall: OPEC will soon exhaust its spare capacity and U.S shale lacks the ability to significantly grow in the years ahead

The world stands on the cusp of an oil supply crisis. Years of insufficient investment in offshore mega-projects combined with the end of U.S. shale hyper growth and a recent shift by global supermajors to preferentially invest in alternative energy over traditional hydrocarbons have resulted in an oil industry that lacks the ability to meaningfully grow its production in the years ahead.

Why does this matter when we read headlines every day prophesizing the end of oil due to the imminent mass adoption of alternatives such as hydrogen and electric cars?

This is our energy reality: the world is nowhere near peak oil demand. Global population growth of 1.2 billion people over the next 20 years combined with decades’ long runway for alternatives to reach critical scale mean that oil demand will grow for years to come.

Yet, the delusion of imminent peak oil demand is having a profound impact on the willingness of companies to invest today in large, extremely expensive projects that often take four to six years to come onstream and a further four years to recoup initial investment.

How can a CEO justify sanctioning a multi-billion dollar project that takes 10 years to reach payout when the demand outlook a decade from now is so uncertain? The fear of peak demand is leading to the reality of peak supply.

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