What if there was no US shale?

In 1977 James Schlesinger (first US Secretary of Energy) noted that the energy markets have only two modes: Complacency and Panic. To that I would now update.

Disdain, Complacency and Panic.

Currently there is disdain for oil; we don’t want it, its unnecessary and pretty soon we won’t need it.

But of course the reality is that not only do we still need oil, but the demand is growing. This doesn’t play well, and headline writers love to announce that “oil demand is dropping” when what they actually mean is that “the rate of growth (of oil demand) is decreasing” – why let facts get in the way of a good headline? The day will come when demand drops, but it’s not just yet.

Demand is expected to increase by 1.3mmbbls/d this year, which is less than the 1.7mmbbls/d increase in each of the previous three years. To put this into perspective, global demand was c. 89mmbbls/d in 2012 when I started working in equity investing, and passed 100mmbbls/day in 2018. Ten million barrels/day of extra demand is a very big increase in just 6 years. But as Spencer Dale of BP puts it: “demand is the boring uncle, supply is the excitable niece”.

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