Peak Oil Demand

Brit Ryle

Posted July 7, 2023

My son graduated high school in 2020. And he started college in fall of the same year. Obviously, the pandemic cost him a lot…

That final semester of a senior year in high school, sheesh. When the cliques fade away as the kids realize all the high school drama was bullshit and they’re about to really embark on their lives — exhilarating. truly the best of times. 

Freshman year, challenging for sure, but exactly what my boy was yearning for…

And it was all horrible. 

He spent that first semester at university of Maryland basically locked in his dorm room attending classes online. 

When he said he wanted to come home for spring semester (2021), I said hell yeah. And we moved to a house down by the water in Baltimore’s fells point because I figured that would be the place to be when everything finally opened up and he could be right in the thick of it. 

It didn’t work out exactly as I planned. What does? 

After he made the decision to bail on campus housing, he said, hey dad, could we do a car restoration project? At that point I would’ve bought him a litter of wolf puppies if it made him feel better…

But his dream car is a Corvette, and I like cool cars, so I said sure son, let’s go find a beater Corvette to work on….

The first car I ever bought with my own money was a 1979 Triumph Spitfire. Seemed cool, but that 1500cc engine was barely enough for a lawn tractor…

I sold it and rolled it all into a 1973 TR-6. Now THAT was a really fun car to drive. 

It’s funny, the prism you remember stuff through. When my son brought up the rehab, I thought, oh man, this’ll be awesome. A little father/son bonding, and a cool old Corvette…

I have some mechanic skills. Owning 2 British sports cars in a row, coupled with a stepdad who was a Chief in the Navy will do that for you. I changed a clutch, wheel bearings, leaf spring, head gasket, I rebuilt carbs and I pop-riveted new vinyl tops onto convertible frames… 

Truth is, I pretty much hated every minute of the work. 

And I wasn’t really thinking about the neat hole I’d put in in my folks garage door after hurling a screwdriver. Or the dent in the TR-6’s front fender where I hit it with a rubber mallet — probably during the bearing change… 

So we found a great candidate on Maryland’s Eastern Shore — a 1976 StingRay that needed everything — brakes, steering and front suspension, dash, carpets. But the chassis was virtually rust free, and the engine was tight…

This Corvette has the L-83 engine in it – a 5.7 liter V-8 monster that looks shoehorned into the engine compartment.

First thing my son and I did together was change the distributor cap and plugs — which took about 3 hours because there’s not enough room to reach the plugs from the top of the engine, you have to jack the car up and crawl underneath. And a couple of the plugs are so tight behind the exhaust manifold that you need a special wrench. 

And that’s when I remembered that I really do hate working cars…

Living down in Fells Point was not very conducive to working on that Corvette. And I didn’t much want to work on it anyway. Plus, my son stayed fairly busy, so the car mostly sat under cover for a year.

Then I moved out of Baltimore. All the way down to southern Georgia, where I thought I was retiring on a tidal creek where the St Mary’s river hits the ocean between Cumberland and Amelia islands. 

I’ve got that Corvette running pretty good. Still needs the interior done, and I haven’t put tags on it yet, but I drove it up to the corner store the other night (no tags, cuz that’s how I roll). Plus, small town Georgia…what.

I’ve put in brake lines and calipers, a new radiator that I had rig with some custom welding, a couple Helio-coils for wrenched off bolts, steering column, new carb — and I’ve barely cursed and I haven’t thrown a single wrench (or screwdriver).

Sadly, the Corvette is still in my son’s name. And I’m trying to figure out how to keep it for myself. Because, after the work I’ve put into it, I’m looking forward to driving this gas guzzler for a while…

Fossil Fuels Legacy

Cars, trucks and planes use around 70% of annual global oil production. And even with the news out today that both Tesla (NASDAQ: TSLA) and BYD (BYDDF) set records for quarterly EV sales – 466K and 703K, respectively – it’s not impacting the amount of oil that’s being used around the world. 

Or more accurately, it’s bringing oil demand down.

For 2022, renewable energy only gained 1% market share for energy generation, supplying 7.5% of the world’s electricity needs, according to the World Energy report. 

Demand for oil grew by 2.9 million barrels a day, to 97.3 bpd. Oil continues to provide 82% of the world’s energy needs.

And it’s because of transportation, like my Corvette. Even with EV sales booming, there is an installed base of vehicles that use fossil fuels, and that base is going to take a long time to displace. 

One thing seems fairly certain – oil demand is at or near its peak. And while the world’s oil demand may well run around 97 million barrels a day for the next few years, the odds of any significant demand increase seems pretty slim. 

So while the business may be good for oil companies going forward, I just don’t see much incentive to buy the stocks. Because in an environment where demand is basically capped, revenue and profit growth are completely dependent on the price per barrel…

And while we’re seeing very significant production cuts from Saudi Arabia and supposedly from Russia (though I don’t why anyone would trust Russia to follow through on its promise), oil prices remain weak. 

Maybe oil is still pricing in a recession. Or maybe traders are just pricing in the possibility that this is as good as it will get for oil. 

That’s it for me today, enjoy your holiday tomorrow and I’ll talk to you Wednesday 

Briton Ryle

Chief Investment Strategist
Pro Trader Today