I am medium and long term bullish on oil. I believe it is a matter of simple mathematics. The decline rates in production from giant oil fields discovered decades ago are simply too large to overcome in order to grow production significantly every year. And oil demand continues to increase as the number of people on earth increases and the per capita consumption of oil increases as emerging economies develop.
What I haven’t been however is bullish natural gas. But I am starting to lean that way. I recently read Exxon Mobil’s (XOM) 2012 Energy Outlook which has gotten me closer to being convinced that natural gas demand is about to enter a long steady growth trend.
Below are 13 conclusions which Exxon reached and included in the above linked report:
Seth Klarman’s Collective Wisdom: Risk Analysis Is The Key To Investment Success
Please note this article is based on publicly available information, however ValueWalk just received Baupost's 2018 letter moments ago and will have exclusive coverage shortly. Seth Klarman is widely regarded as one of the best value investors the world has ever seen. Over the past few decades, his hedge fund, the Boston-based Baupost, has achieved Read More
1) Global energy demand will be about 30 percent higher in 2040 than in 2010, as economic output more than doubles, and prosperity expands across a world whose population will increase to nearly 9 billion people.
2) In developed countries (North America and Europe) energy use will remain essentially flat even with economic growth and higher living standards.
3) In non-OECD countries energy demand will grow by close to 60 percent. China’s surge in energy demand will extend over the next two decades and then gradually flatten as its economy and population mature.
4) In other non-OECD countries billions of people will be working to advance their living standards which means they will require more energy. The need for energy will make electricity will remain the single biggest driver of energy demand.
5) By 2040 electricity generation will account for more than 40 percent of global energy consumption.
6) Demand for coal will peak and then begin a gradual decline because of emerging policies that will seek to curb emissions by imposing a cost on higher-carbon fuels.
7) Use of renewable energies and nuclear power will grow significantly.
8) Oil, gas and coal will continue to be the most widely used fuels and have the scale needed to meet global demand making up 80% of total energy consumption in 2040.
9) Natural gas will grow fast enough to overtake coal for the number two position behind oil. Demand for natural gas will rise by more than 60 percent through 2040.
10) For both oil and natural gas an increasing share of global supply will come from shale formations.
11) Gains in efficiency through energy saving practices and technologies like hybrid vehicles and new high-efficiency natural gas power plants will temper demand growth and curb emissions.
12) Global energy-related carbon dioxide emissions will grow slowly, then level off around 2030.
13) In the United States and Europe where a shift to less carbon-intensive fuels such as natural gas is already under way, emissions will decline through 2040.