Since 1965, global oil consumption has more than tripled from about 31 million barrels per day to almost 100 million barrels per day last year.
Demand will likely continue to expand over the next decade. However, the rate of growth eventually will slow, and global consumption will reach a plateau. The familiar commodity cycle underpins this outlook.
Oil prices remain on the low side, especially relative to 2010-14, when West Texas Intermediate hovered around $100 per barrel. Meanwhile, output from US shale plays continues to boom, as resourceful operators have discovered ways to reduce their break-even rates and cope with the collapse in oil prices that began in mid-2014.
Lower oil prices have also spurred a boom in global demand.
According to the International Energy Agency, global oil consumption will surge by 6.2 million barrels per day between 2014 and 2018, resulting in an average annual growth rate of more than 1.5 million barrels per day. In contrast, global oil demand increased by an average of about 1 million barrels per day over the preceding four-year period.
This phenomenon has even played out in the mature US market.
The US Dept of Transportation’s estimate of total vehicle miles traveled per month remained roughly flat from 2004 to 2014, reflecting a vicious one-two punch of high gasoline prices from 2004 to 2008 and a severe economic downturn between 2007 and 2009.
Since oil and gasoline prices began to decline in mid-2014, US vehicle miles traveled have surged, with this data set making higher highs and higher lows.
Meanwhile, the popularity of larger, less-fuel-efficient vehicles has also soared, with trucks and sport-utility vehicles accounting for more than two-thirds of US auto sales.
Rapidly growing oil volumes from the Permian Basin and other US shale plays have kept a lid on this commodity price, supporting demand growth. However, this dynamic will break down, too.
Ingenious US shale oil and gas producers have developed new ways to extract resources more efficiently, including drilling longer wells, improving well placement, tightening spacing between fracturing stages, optimizing the amount of fracking sand per lateral foot, and pursuing multi-well developments from a single pad. More efficiency gains will come from process automation and leveraging big data to optimize development plans.
Your complete guide to energy investing, from growth stocks to high-yielders.
In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Nov. 30, 2021
Balanced portfolios of energy stocks for aggressive and conservative investors.
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
Our assessment of every energy-related master limited partnership.
Roger Conrad’s coverage of more than 70 dividend-paying energy names.