WEBVTT - Peak Oil and the Long Descent Down the Mountain 0:00:00.120 --> 0:00:02.920 Hi, I'm Dana Perkins and you're listening to Switch It 0:00:02.960 --> 0:00:05.960 on the bn EF podcast. So BE an F recently 0:00:05.960 --> 0:00:09.559 published our new Energy Outlook. It's an annual exercise where 0:00:09.560 --> 0:00:13.680 we look at the future and possible scenarios for energy 0:00:13.680 --> 0:00:17.279 and emissions out to the year twenty fifty. One of 0:00:17.320 --> 0:00:19.920 the things this year's Outlook has shown is that we 0:00:20.000 --> 0:00:23.960 may have brought forward a triple peak in emissions coal 0:00:24.160 --> 0:00:26.960 and gas, and what if we've also brought forward a 0:00:27.040 --> 0:00:30.680 peak in oil demand? And what if it's actually already 0:00:30.680 --> 0:00:34.280 happened in nine Now that's sort of the nature of 0:00:34.280 --> 0:00:36.559 a peak is that you don't know that it's happened 0:00:36.640 --> 0:00:39.360 until you look back and you see that the peak 0:00:39.479 --> 0:00:42.280 is there and you're on the other side. So that's 0:00:42.280 --> 0:00:44.479 what we're going to talk about today, whether or not 0:00:44.640 --> 0:00:48.040 this maybe already happened. Today, we're speaking with David Doherty 0:00:48.080 --> 0:00:50.760 on the show. He's an oil demand analyst here at 0:00:50.800 --> 0:00:53.080 b ANF and Mark Taylor and I talked to him 0:00:53.080 --> 0:00:56.560 about whether we are or are not on the downhill 0:00:56.600 --> 0:01:00.040 slide or oil demand. Per our usual disclaimer, BE and 0:01:00.120 --> 0:01:02.720 the F does not provide investment of strategy advice, and 0:01:02.760 --> 0:01:05.200 we have a full disclaimer at the end of the show. 0:01:05.360 --> 0:01:07.680 If you want to read the full New Energy outlook, 0:01:07.760 --> 0:01:10.080 you can find it at b enof Go, on the 0:01:10.080 --> 0:01:13.560 Bloomberg terminal at b NF dot com, or on b 0:01:13.640 --> 0:01:23.839 NF's mobile app. Now, let's talk to David about peak oil. David, 0:01:23.920 --> 0:01:26.399 thanks for joining us, Thank you for having me. Always 0:01:26.400 --> 0:01:27.959 good to have you on the show. So, David, you're 0:01:27.959 --> 0:01:31.560 here today and you are an oil demand analyst, and 0:01:31.600 --> 0:01:33.399 we're here to talk about peak oil. Now, I'm going 0:01:33.440 --> 0:01:35.760 to rewind the clock to you know, version of me 0:01:35.840 --> 0:01:39.039 and graduate school, young whipper snapper talking about peak oil. 0:01:39.480 --> 0:01:41.400 And when I think of peak oil, I always think 0:01:41.440 --> 0:01:43.919 of it as a supply side issue in US having 0:01:43.959 --> 0:01:48.000 a difficult time actually extracting and becoming increasingly expensive and 0:01:48.040 --> 0:01:51.760 therefore we're no longer able to get oil out to everybody. David, 0:01:52.120 --> 0:01:55.120 what is peak oil from the demand side? Yeah, it's 0:01:55.120 --> 0:01:58.040 a good question, and it's changed, I guess from when 0:01:58.080 --> 0:01:59.800 you're talking about and from when I got into the 0:02:00.040 --> 0:02:04.680 industry as well, and the US found shale technology, advanced 0:02:04.880 --> 0:02:08.160 old fields could be developed more and supply was basically 0:02:08.160 --> 0:02:10.519 not a concern anymore. There was enough to go around 0:02:10.680 --> 0:02:12.960 and enough to meet all of this new demand. The 0:02:13.000 --> 0:02:15.919 shift between then and now is a bunch of different things. 0:02:16.520 --> 0:02:20.440 You know, efficiency gains, consciousness of the environment, and now 0:02:20.520 --> 0:02:23.799 it's a focus on oil demand speaking, So when will 0:02:23.880 --> 0:02:28.360 people want to or need to consume less oil that? 0:02:28.400 --> 0:02:31.160 Obviously that impacts all the way down the value chain. 0:02:31.520 --> 0:02:32.880 Do you need to take it out of the ground? 0:02:33.280 --> 0:02:35.880 How do you consume that? What emissions go out into 0:02:35.880 --> 0:02:37.920 the world, So totally different to the way we used 0:02:37.960 --> 0:02:40.280 to think about it and saying is there enough for 0:02:40.360 --> 0:02:42.720 us to be able to meet our needs versus do 0:02:42.800 --> 0:02:45.560 we need this much to meet that amount to take 0:02:45.560 --> 0:02:47.760 it out of the ground. So yeah, completely flipped first 0:02:47.760 --> 0:02:49.600 is what we would sort of have spoken about this 0:02:49.639 --> 0:02:53.200 time ten years ago. Is understanding peak important? Is it 0:02:53.240 --> 0:02:55.720 anything more than an academic exercise or does it allow 0:02:55.760 --> 0:02:57.960 you to do anything that you wouldn't do otherwise? The 0:02:58.000 --> 0:03:00.800 answer is yes and no. Right, if you're taking this 0:03:00.840 --> 0:03:03.519 stuff out of the ground or extracting it, you want 0:03:03.520 --> 0:03:06.639 to know when or at what rate you're going to 0:03:06.720 --> 0:03:08.600 need less of it or people are gonna want less 0:03:08.600 --> 0:03:11.760 of it. So obviously, if you're an oil producer, you 0:03:11.800 --> 0:03:13.400 want to know when people are going to want more 0:03:13.520 --> 0:03:16.119 or less of your product, right, and when that occurs 0:03:16.520 --> 0:03:19.239 in terms of environmentalists or people who are concerned about 0:03:19.280 --> 0:03:22.880 emissions or global warming, oil isn't great obviously in that 0:03:22.919 --> 0:03:26.519 sense for the environment. So the less that's consumed and 0:03:26.600 --> 0:03:28.359 the less that's burned at the end of the day 0:03:28.360 --> 0:03:32.160 and admits less is a good thing for the environment, right, 0:03:32.480 --> 0:03:36.119 So yes, and know in those senses, when is kind 0:03:36.120 --> 0:03:39.240 of the less important part. I would argue whether it's 0:03:39.240 --> 0:03:42.680 twenty thirty, whether it's I think what we've sort of 0:03:42.680 --> 0:03:45.760 discovered in the last little while, maybe two three years, 0:03:45.880 --> 0:03:48.520 is that peak demand is in sight. And in many 0:03:48.600 --> 0:03:51.960 cases people think peak demand may have even happened. We 0:03:52.000 --> 0:03:54.440 saw at least in jewel terms, BP this year is 0:03:54.440 --> 0:03:57.640 saying nineteen might have been the peak for oil demand. 0:03:57.720 --> 0:03:59.880 Why are they saying that? They've got a bunch of reasons, 0:03:59.880 --> 0:04:02.720 but hind it. One is we might not recover after COVID. 0:04:02.760 --> 0:04:04.839 It's took such a hit this year. We've seen oil 0:04:04.880 --> 0:04:08.520 deman this year go down almost ten percent, right, so 0:04:09.080 --> 0:04:11.920 wiping out almost a decade of growth and gains. So, 0:04:12.680 --> 0:04:15.600 you know, will we get back the levels? I mean, 0:04:15.640 --> 0:04:17.880 it depends we're you know, working from home here at 0:04:17.880 --> 0:04:20.640 Bloomberg and YEF, will we go back into the office, 0:04:20.720 --> 0:04:22.640 will we drive a car if we go into the office, 0:04:22.680 --> 0:04:25.080 depending on where we are, Will I fly to see 0:04:25.120 --> 0:04:27.600 my family next time? Lots of different things, right, Just 0:04:27.640 --> 0:04:29.800 the way that we live has changed, so they think 0:04:29.839 --> 0:04:32.719 that might have caused the shift in some of their scenarios. 0:04:33.000 --> 0:04:35.359 And even when we get back to gains or growing 0:04:35.400 --> 0:04:38.880 again or quote unquote normality, what does that normality look like? 0:04:38.920 --> 0:04:40.680 Are we still going to be flying as much? Is 0:04:40.680 --> 0:04:42.240 it going to be as cheap to fly? Will there 0:04:42.240 --> 0:04:44.600 even be an airline for us to fly with? You know, 0:04:44.800 --> 0:04:48.400 those kind of questions totally structural changes will impact the 0:04:48.440 --> 0:04:51.440 consumption profile of this product for sure. So David, we 0:04:51.480 --> 0:04:54.560 could actually just retitle this podcast like ask the expert. 0:04:54.600 --> 0:04:57.599 You're the expert here today, and you've read a bunch 0:04:57.640 --> 0:05:00.320 of these different scenarios, and I want to know what 0:05:00.520 --> 0:05:02.000 is your view? When do you think did the peak 0:05:02.040 --> 0:05:04.720 already happen or is it outcoming? And you know, I 0:05:04.760 --> 0:05:06.880 want to make sure I plan to have like give 0:05:06.920 --> 0:05:09.440 it its momentous occasion, because if it's already happened, and 0:05:09.480 --> 0:05:11.240 I totally missed it. I'm feeling a little bummed out 0:05:11.240 --> 0:05:12.960 about that. When do you think this is going to happen? 0:05:13.360 --> 0:05:15.600 We are calling a peak first, I mean expert I 0:05:15.640 --> 0:05:17.800 think is a dangerous term. I think maybe energy or 0:05:17.800 --> 0:05:19.640 an oil nerd is a good way to phrase it. 0:05:20.600 --> 0:05:23.159 As the nerd. As the nerd, we look at this 0:05:23.240 --> 0:05:25.400 every day, and this is kind of our bread and button, 0:05:25.400 --> 0:05:28.000 and we look at all of the really detailed, boring 0:05:28.040 --> 0:05:30.720 parts that in general people that want to pay attention to, like, 0:05:31.040 --> 0:05:33.560 hen many cars are on the road, how will those 0:05:33.560 --> 0:05:37.000 cars be driven? Will it be electric or gastine, etcetera, etcetera. 0:05:37.440 --> 0:05:41.360 So we have been are calling a peak in five again. 0:05:41.839 --> 0:05:44.760 I think the time range is kind of I don't 0:05:44.800 --> 0:05:50.120 say irrelevant, but you're seeing three is kind of that 0:05:50.160 --> 0:05:52.840 time period, depending on who you're talking to, of quote 0:05:52.920 --> 0:05:56.400 unquote experts calling peak oil demand. And it really comes 0:05:56.400 --> 0:06:00.720 down to when they see different technologies overtaking things like 0:06:00.920 --> 0:06:04.880 internal combustion engine cars, how many people consume plastic wrapping 0:06:04.880 --> 0:06:09.040 on their food, how quickly the population grows and GDP grows, 0:06:09.520 --> 0:06:12.680 and so there's a few kind of underlying currents on it. 0:06:12.720 --> 0:06:15.520 But the fact that the vast majority of forecasters now 0:06:15.560 --> 0:06:18.359 see this happening even in that fairly wide period of 0:06:18.400 --> 0:06:20.880 time is different too, if we're going to have this 0:06:20.960 --> 0:06:23.440 chat even a year ago. So this came from an 0:06:23.480 --> 0:06:26.400 exercise BNF does every year called the New Energy Outlook 0:06:26.480 --> 0:06:29.760 or NEO. Can you explain a bit your methodology how 0:06:29.800 --> 0:06:31.920 you got to peak? As you mentioned some of the 0:06:32.000 --> 0:06:34.240 economic undercurrens there, but cow us did you did you 0:06:34.320 --> 0:06:36.560 arrive at the conclusion of peak? The way that we 0:06:36.680 --> 0:06:40.039 look at oil, we don't look at oil as a 0:06:40.080 --> 0:06:44.520 whole market. We have separate sort of deep dives into aviation, 0:06:44.560 --> 0:06:48.159 a different deep dive into cars, into ships, into plastics 0:06:48.160 --> 0:06:52.320 and petrochemicals and power markets. And at the end we 0:06:52.440 --> 0:06:54.440 all came together in our team and put them into 0:06:54.520 --> 0:06:56.280 one piece. And it was sort of exciting for us 0:06:56.279 --> 0:06:59.320 to see when all these numbers are added together, what 0:06:59.440 --> 0:07:02.280 year did we called peak one? Because it's the number 0:07:02.320 --> 0:07:05.560 everybody's going to talk about and we compare ourselves to others. 0:07:05.600 --> 0:07:08.200 So whether it came to counting cars on the road, 0:07:08.880 --> 0:07:11.920 what powered those cars, counting airplanes and the sky ships 0:07:11.920 --> 0:07:16.440 on the sea, um demand for plastics and packaging. We 0:07:16.480 --> 0:07:18.480 went from the ground up for all of these pieces, 0:07:18.480 --> 0:07:21.400 piece them altogether and got to this overall peak oil 0:07:21.640 --> 0:07:25.679 demand story by five. And it is interesting to see 0:07:25.800 --> 0:07:28.560 when you look at those individually, you don't think at 0:07:28.600 --> 0:07:30.880 all about what this means for peak oil de man 0:07:31.000 --> 0:07:33.400 as a whole. You're really looking at the sector as 0:07:33.440 --> 0:07:36.160 a base. So you know, some do peak, some don't. 0:07:36.520 --> 0:07:40.160 We think aviation, unless there's going to be something rapid 0:07:40.400 --> 0:07:44.400 or a big technology change, probably won't peak in the 0:07:44.480 --> 0:07:47.640 next thirty years or so, whereas where there are some 0:07:47.720 --> 0:07:51.760 other sectors that have a solution already in place, maybe 0:07:51.840 --> 0:07:55.160 not at scale just yet, Um, there's hope for peak there. 0:07:55.800 --> 0:07:58.080 So when we look at them individually, we weren't really 0:07:58.160 --> 0:08:00.400 thinking about a peak oil story when we roll them all, look, 0:08:00.440 --> 0:08:02.080 but we've got that kind of exciting one veil of 0:08:04.160 --> 0:08:06.600 that was it. So it's massively at bottom up exercise 0:08:06.640 --> 0:08:10.040 with lots of nice inputs and data points that got 0:08:10.080 --> 0:08:13.600 to this sort of over arch of peak oil demand story. 0:08:13.920 --> 0:08:16.400 To your point about COVID, there are certain industries though 0:08:16.400 --> 0:08:19.240 that maybe take quite some time to come back. So 0:08:19.360 --> 0:08:22.080 you mentioned aviation just now, and I'm thinking about all 0:08:22.240 --> 0:08:24.720 of the British Airways planes that have been retired and 0:08:24.760 --> 0:08:27.680 the fact that they recently started selling off the I 0:08:27.680 --> 0:08:30.080 guess the business class and the first class cutlery and 0:08:30.200 --> 0:08:33.320 plates and bowls and things. But I mean, in all seriousness, 0:08:33.320 --> 0:08:35.560 that's an entire fleet of planes that have been retired 0:08:35.600 --> 0:08:37.480 because they're not in use at the moment. It's going 0:08:37.520 --> 0:08:39.439 to take some time for that to come back. And 0:08:39.480 --> 0:08:41.360 do you think that that gap, I mean, I know 0:08:41.400 --> 0:08:43.080 we're here to talk about peak oil, but in not 0:08:43.160 --> 0:08:45.360 aviation specifically, But do you think that that gap could 0:08:45.360 --> 0:08:50.000 provide potentially a space for some of these industries that 0:08:50.120 --> 0:08:54.240 are hard hit by COVID to actually re emerge differently? Yeah, 0:08:54.240 --> 0:08:56.360 come back, greener, I guess is that kind of fingured 0:08:56.400 --> 0:09:01.600 it into its a in stressed area for lots of 0:09:01.640 --> 0:09:04.720 different sectors and lots of different bodies who regulate or 0:09:05.080 --> 0:09:07.560 orchestrate what happens in these sectors. If we look at 0:09:07.600 --> 0:09:10.280 the aviation sector as an example, you're seeing less and 0:09:10.360 --> 0:09:13.720 less of us flying this year, about fifty less people 0:09:13.720 --> 0:09:16.040 are flying versus last year, right, or less passengers, I 0:09:16.080 --> 0:09:19.280 should say, So you don't need as many airplanes. The 0:09:19.360 --> 0:09:22.200 older airplanes, like you said, are getting parked or taken 0:09:22.240 --> 0:09:25.280 apart for pieces and what's left is basically the more 0:09:25.280 --> 0:09:27.480 efficient ones. Right. An airline doesn't want to spend its 0:09:27.520 --> 0:09:29.080 money on jet fuel, right, It wants to have a 0:09:29.080 --> 0:09:32.679 really efficient airplane and get tickets in and fly people. 0:09:33.040 --> 0:09:36.160 You can take the same logic and look at different 0:09:36.160 --> 0:09:38.959 sectors the same way. Some it's beneficial for well this 0:09:39.160 --> 0:09:41.520 it's not so. If you look at plastics, for example, 0:09:41.800 --> 0:09:43.839 there's more demand this year for plastics. You're seeing a 0:09:43.840 --> 0:09:46.240 lot of things. If we get a meal, now you 0:09:46.240 --> 0:09:48.720 don't just get a knife and fork that's plastic, get 0:09:48.720 --> 0:09:51.280 a plastic knife and fork that's wrapped in plastic. More 0:09:51.280 --> 0:09:55.079 plastics and masks for example. And then you have cars 0:09:55.120 --> 0:09:57.800 we saw this year, for example, passenger car sales pretty 0:09:57.840 --> 0:10:01.080 much around the world have fallen and in some cases 0:10:01.120 --> 0:10:04.680 collapse in sales. That means that the turnover of the fleet, 0:10:04.960 --> 0:10:08.120 of the internal combustion engine fleet at least is slower. 0:10:08.200 --> 0:10:10.760 So you've got more inefficient cars left on the road. 0:10:10.960 --> 0:10:13.160 You could argue the driving more or less. And in 0:10:13.240 --> 0:10:15.720 some cases you've seen the sales that are recovering a 0:10:15.760 --> 0:10:18.160 lot more of them being electric cars. So Europe is 0:10:18.200 --> 0:10:21.120 a good example where they're incentivizing to get any car 0:10:21.160 --> 0:10:23.880 sales going electric cars, and we're seeing big proportions of 0:10:23.920 --> 0:10:26.199 all the new cars sold in Europe being electric. So yeah, 0:10:26.280 --> 0:10:28.360 it's it's not as easy as story is saying, oh, 0:10:28.400 --> 0:10:31.400 it's coming back greener, because every sector is very different, 0:10:31.800 --> 0:10:35.760 but you are having pushes, particularly from some policymakers to 0:10:35.840 --> 0:10:38.480 go towards that way. Last year, we had you on 0:10:38.480 --> 0:10:41.400 the show talking about road fuels and the outlook for those, 0:10:41.400 --> 0:10:43.719 and the conclusion was that they were going to keep 0:10:43.720 --> 0:10:46.760 going up, right, because I think it was increased deliveries 0:10:47.440 --> 0:10:51.600 and I think increased drivers or because number of drivers 0:10:51.600 --> 0:10:55.880 in currently developing markets. Did your outlook change for road 0:10:55.920 --> 0:10:58.679 fuels as a part of this neo exercise? And how 0:10:58.679 --> 0:11:00.840 does that fit in with peak oil? It feels the 0:11:00.920 --> 0:11:04.319 most important part of the oil consumption. Pie. It's about 0:11:04.400 --> 0:11:07.040 it something like forty seven percent of all of the 0:11:07.080 --> 0:11:09.280 oil consumed in the world. So when we spoke about 0:11:09.280 --> 0:11:12.120 this last year, we saw the passenger consumption, so passenger 0:11:12.160 --> 0:11:14.439 cars that me and you would drive, for example, demand 0:11:14.520 --> 0:11:17.160 is likely to decline. We're seeing lots of electric vehicles, 0:11:17.280 --> 0:11:20.680 lots of regulations about fuel economy, so that that goes down. 0:11:20.840 --> 0:11:25.040 What we saw driving growth was truck's, commercial vehicles, things 0:11:25.120 --> 0:11:28.720 like Amazon deliveries, and again COVID has impacted each of 0:11:28.760 --> 0:11:32.120 these segments very differently. So in Europe we're working from home, 0:11:32.160 --> 0:11:35.920 for example, the vast majority of commuters in Europe go 0:11:36.040 --> 0:11:38.200 to work on things like the tube here in London 0:11:38.559 --> 0:11:41.120 or the metro in Paris for example, So that doesn't 0:11:41.320 --> 0:11:44.360 directly impact well, it does directly if you get a bus, 0:11:44.400 --> 0:11:46.760 but it doesn't as have as big an impact on 0:11:46.880 --> 0:11:49.200 road field consumption as if you were to take the 0:11:49.200 --> 0:11:51.360 same example in the United States, where a lot of 0:11:51.400 --> 0:11:54.400 people drive to and from work right over nine. So 0:11:54.600 --> 0:11:58.000 the private or the passenger segment, I mean you're driving, 0:11:58.160 --> 0:12:00.720 took a big hit this year in in the world 0:12:00.720 --> 0:12:03.800 pretty much in terms of oil consumption. On the other side, though, 0:12:03.960 --> 0:12:08.160 we've all been shopping online Ali Baba Amazon. My mom 0:12:08.200 --> 0:12:10.400 now does her shopping and gets her stuff delivered to 0:12:10.440 --> 0:12:12.880 her instead of her driving to the store to get it. 0:12:13.000 --> 0:12:14.880 And now she's quite comfortable and that drives a lot 0:12:14.960 --> 0:12:16.840 more than shoes to That means that there needs to 0:12:16.840 --> 0:12:18.840 be a delivery driver to send that to her house. 0:12:18.960 --> 0:12:21.440 So what we've seen is we've actually got support for 0:12:21.520 --> 0:12:24.520 things like delivery vans that normally run off of diesel 0:12:25.160 --> 0:12:27.480 driving to the house of somebody and delivering something, as 0:12:27.520 --> 0:12:30.040 opposed to say the gasoline that was consumed in the 0:12:30.040 --> 0:12:32.439 passenger car going to a store to get something. So 0:12:32.640 --> 0:12:36.120 underlying all of this destruction, you're seeing a change in dynamics. 0:12:36.520 --> 0:12:38.760 And this is really important if you're a refiner or 0:12:38.800 --> 0:12:41.840 a fuels producer, right, you want to know what's doing well, 0:12:41.960 --> 0:12:44.600 what's not doing so well. Jet fueled man is quite 0:12:44.600 --> 0:12:47.560 obvious to go down. Gasoline is taking a hip. Diesel 0:12:47.600 --> 0:12:50.640 is doing not so great, but much better than gasoline. Right. 0:12:50.679 --> 0:12:52.520 This all impacts that these guys are going to run 0:12:52.520 --> 0:12:56.040 their companies. So every sector COVID hit in a different way. 0:12:56.400 --> 0:13:00.200 Passenger and road transport in general not left alone, but 0:13:00.360 --> 0:13:03.400 under that sort of there's different dynamics of things that 0:13:03.440 --> 0:13:05.719 have done really well out of it. So more deliveries 0:13:05.760 --> 0:13:08.560 for sure, Mrs Doherty, if you're listening, you're not alone. 0:13:08.640 --> 0:13:11.079 I haven't been to a grocery store in over six months. 0:13:11.800 --> 0:13:13.839 I don't remember the last time I've been in the store. 0:13:13.880 --> 0:13:15.880 I think, I think I feel sorry for the delivery 0:13:15.960 --> 0:13:18.160 drivers who have to have a chat once they deliver 0:13:19.360 --> 0:13:21.679 I was gonna say, my street is nothing but delivery 0:13:21.760 --> 0:13:24.280 vans all day long. Yeah, I think we've all thought 0:13:24.600 --> 0:13:27.280 it's a good idea and it is actually incredibly helpful. 0:13:27.320 --> 0:13:30.040 But yeah, that impacts how we drive our own personal cars. Right, 0:13:30.080 --> 0:13:33.160 So different dynamics and the oil, the oil pie underlying 0:13:33.200 --> 0:13:38.120 all that. Now for a very short break, stay with us, So, David, 0:13:38.240 --> 0:13:40.480 surely this is something that the oil and gas industry 0:13:40.520 --> 0:13:44.360 is watching extremely closely themselves. So what is the reaction 0:13:44.400 --> 0:13:46.439 from that side and what did their forecasts say? Do 0:13:46.520 --> 0:13:49.839 they differ? Yeah, there's a huge variety of forecasts out 0:13:49.840 --> 0:13:52.880 there in terms of oil consumption, different scenarios around it. 0:13:52.960 --> 0:13:54.640 What are the drivers? What does it mean for our 0:13:54.679 --> 0:13:57.480 business model? Are we going to completely change our business model? 0:13:57.720 --> 0:14:00.760 And it really really varies, honestly. You've got some people 0:14:01.000 --> 0:14:04.839 like BP and Hotel who are looking at declining oil 0:14:04.840 --> 0:14:07.839 demand from about twenty thirty onwards, and then you've got 0:14:07.880 --> 0:14:11.560 others like OPEC, for example, who see it getting slower 0:14:11.559 --> 0:14:15.800 in terms of growth but still growing out for example, 0:14:16.000 --> 0:14:18.560 So two different stories. If you were to look at 0:14:18.559 --> 0:14:20.640 those forecasts, what does it mean for an oil and 0:14:20.680 --> 0:14:22.760 gas company? I mean in theory. This is their bread 0:14:22.760 --> 0:14:26.160 and butter. We're seeing different approaches. Some are turning into 0:14:26.640 --> 0:14:29.400 energy molecule sellers, if that makes sense, as opposed to 0:14:29.480 --> 0:14:31.480 oil and gas producers. So I want to sell you 0:14:31.480 --> 0:14:33.920 a jewel of energy that could be electric for your car, 0:14:34.040 --> 0:14:36.680 that could be you know, anything for your home, gas, 0:14:36.960 --> 0:14:39.760 you name a biofuel, their few we got you, and 0:14:39.800 --> 0:14:42.720 you've others here sticking to oil and gas. So massive 0:14:42.720 --> 0:14:46.040 different forecasts out there and big variations in terms of 0:14:46.080 --> 0:14:48.760 approach and how they'll respond to this. Either way, there 0:14:48.760 --> 0:14:51.040 will be a requirement for oil we think in the 0:14:51.080 --> 0:14:53.400 next thirty or forty years, and and how that comes 0:14:53.400 --> 0:14:55.560 out of the ground and who produces it, you know, 0:14:55.600 --> 0:14:57.600 it remains to be seen. But we have seen this 0:14:57.680 --> 0:15:00.360 year and it's interesting that has been the year for it. 0:15:00.440 --> 0:15:03.160 Given the massive disruption to demand and the hit for 0:15:03.200 --> 0:15:05.840 the oil sector, we've seen a lot of strategies changing. 0:15:06.000 --> 0:15:08.840 You know, the European oil majors, for example, have really 0:15:08.880 --> 0:15:12.280 shifted towards this big energy business model where we'll send 0:15:12.400 --> 0:15:14.520 we'll sell you anything from hydrogen to bios us to 0:15:14.960 --> 0:15:19.400 you know, electricity and more renewable focused energy supply. And 0:15:19.680 --> 0:15:22.760 we've seen others like national oil companies who don't normally 0:15:22.800 --> 0:15:26.120 outline strategies stick towards the oil and gas side of things, 0:15:26.240 --> 0:15:28.720 and even some of the US oil majors sticking towards it. 0:15:28.880 --> 0:15:31.640 But without question, this disruption to the man and this 0:15:31.800 --> 0:15:34.160 peak story, it hits the bottom line for an oil 0:15:34.160 --> 0:15:37.640 and gas company. I mean, we've seen in over seventy 0:15:37.640 --> 0:15:41.120 billion dollars of right downs at the five big oil 0:15:41.160 --> 0:15:44.520 majors already. That compares to like thirty billion dollars in 0:15:44.920 --> 0:15:48.280 fourteen during the previous oil price crash, so really really 0:15:48.360 --> 0:15:50.520 large numbers here. It is a bit of a reality 0:15:50.600 --> 0:15:53.200 check for their business model. They know this, and it's 0:15:53.280 --> 0:15:55.400 it's not news to an oil and gas company who 0:15:55.400 --> 0:15:57.640 are looking at this, But we have seen that this 0:15:57.760 --> 0:16:01.720 big demand shifts in mentality or maybe acceptance might be 0:16:01.720 --> 0:16:03.800 a better way to phrase it. You know, ultimately is 0:16:03.840 --> 0:16:06.200 going to impact the oil price long term, and that 0:16:06.280 --> 0:16:08.400 changes what oil barrel you're going to go for in 0:16:08.440 --> 0:16:09.760 the future, and what when you're going to try to 0:16:09.760 --> 0:16:11.680 get out of the ground, and how can I make 0:16:11.720 --> 0:16:15.120 an oil barrel more appealing in the future while keeping 0:16:15.160 --> 0:16:17.640 it cheap and keeping its emissions as low as possible. 0:16:17.920 --> 0:16:20.160 It just maybe kind of wonder I guess which companies 0:16:20.160 --> 0:16:22.440 are going for the power model, but also which ones 0:16:22.480 --> 0:16:24.480 are going all in on oil. Like we talked a 0:16:24.520 --> 0:16:26.160 couple of weeks ago on the pod about I think 0:16:26.160 --> 0:16:28.880 it's occidental who's going in all in on oil, but 0:16:29.280 --> 0:16:33.000 they're also banking on ccs, you know, at least in 0:16:33.120 --> 0:16:35.320 name I don't know, or c c US whatever you 0:16:35.320 --> 0:16:37.880 wanna call it. Do you see that as common or 0:16:38.120 --> 0:16:40.680 or other companies taking this on all? Are they kind 0:16:40.680 --> 0:16:43.520 of alone in this? No, it's not, it's not uncommon 0:16:43.640 --> 0:16:46.360 at all. You're seeing a real split at least in 0:16:46.400 --> 0:16:50.160 the integrated oil companies or the listed Western oil companies 0:16:50.200 --> 0:16:53.200 I suppose. And again, if you look at in Europe, 0:16:53.240 --> 0:16:56.200 you're seeing the likes of BP, Shell and Hotel setting 0:16:56.280 --> 0:17:01.840 quite aggressive missions reduction targets, normally by far away and 0:17:01.880 --> 0:17:04.160 a lot of it's sort of phrased in a way 0:17:04.200 --> 0:17:06.760 that will actually allow them produced to produce more oil 0:17:06.800 --> 0:17:08.879 and gas if they wanted to throw me like energy 0:17:08.880 --> 0:17:11.520 intensity based. But you are seeing others who are really 0:17:11.560 --> 0:17:14.480 focusing on the oil and gas story. It's not necessarily 0:17:14.520 --> 0:17:16.960 a bad approach because the way the oil comes out 0:17:16.960 --> 0:17:19.159 of the ground. It doesn't just keep flowing forever. You know, 0:17:19.200 --> 0:17:22.880 you've got oil wells and current fields that deplete over time. 0:17:23.000 --> 0:17:24.639 So if you were to look at all of the 0:17:24.640 --> 0:17:27.159 oil that's being extracted today and then look at the 0:17:27.240 --> 0:17:31.119 same supply in twenty you're going to have less than 0:17:31.119 --> 0:17:33.280 a third of that still coming out of the ground, right, 0:17:33.520 --> 0:17:36.280 so you need to replace it. And you're seeing places 0:17:36.359 --> 0:17:41.240 are companies like Conico and Occidental still focusing on extracting oil. 0:17:41.480 --> 0:17:43.600 How they do it, you know, it varies. It could 0:17:43.600 --> 0:17:45.560 be a shale play, it could be offshore place, but 0:17:45.640 --> 0:17:48.639 in general they're shifting towards getting at least the carbon 0:17:48.720 --> 0:17:52.040 profile of their barrel lower, so that every barrel that 0:17:52.080 --> 0:17:55.800 they extract has a better carbon emissions profile than the 0:17:55.800 --> 0:17:58.400 one that they had extracted. You know, in the previous year. 0:17:58.640 --> 0:18:00.520 Some of them have set targets, some of them are 0:18:00.560 --> 0:18:03.720 relying on new technologies. Actually they're all relying on new 0:18:03.720 --> 0:18:06.960 technologies that haven't really been tested or put into scale 0:18:07.000 --> 0:18:09.679 just yet. But at least they're shifting towards that that 0:18:09.960 --> 0:18:12.320 model of things, And you're even seeing it with some 0:18:12.359 --> 0:18:14.840 of the oil majors who want to become a big 0:18:14.960 --> 0:18:18.360 energy supplier and shift away from oil and gas hotel 0:18:18.480 --> 0:18:21.440 for example. They'll still continue to take oil and gas 0:18:21.440 --> 0:18:24.840 out of the ground, but they're focusing on the cleaner 0:18:24.880 --> 0:18:28.560 barrel or the higher return cleaner barrel in future. So 0:18:28.600 --> 0:18:30.640 they're not saying no to oil and gas. They're saying, 0:18:30.640 --> 0:18:33.240 we're gonna go for the less carbon intensive and the 0:18:33.320 --> 0:18:36.600 less risky. Big projects like Arctic drilling and things like 0:18:36.640 --> 0:18:39.119 that have kind of fallen by the waistside now because 0:18:39.119 --> 0:18:41.840 oil prices are just much lower they can't justify that 0:18:41.920 --> 0:18:45.520 big project. But some more simplified like North African extraction 0:18:45.560 --> 0:18:48.520 projects for example, are still getting attention from these oil 0:18:48.520 --> 0:18:50.680 and gas companies, even the ones that want to shift 0:18:50.680 --> 0:18:54.439 towards a utility or renewables power supplier kind of company. 0:18:54.480 --> 0:18:57.640 So yeah, there's totally different approaches, and some are better 0:18:57.680 --> 0:19:00.240 than others at least in indicating how they're going to 0:19:00.320 --> 0:19:04.880 go and extracted in at least a sustainable way. But ultimately, 0:19:04.920 --> 0:19:08.360 you're going to need new supply of oil. Even if 0:19:08.440 --> 0:19:12.240 demand really comes off a cliff and falls to something 0:19:12.280 --> 0:19:15.680 like million pars per day, you're still going to need 0:19:15.840 --> 0:19:18.040 new supply to come and meet that. So there's still 0:19:18.040 --> 0:19:20.440 a business there, and we're gonna see oil being a 0:19:20.520 --> 0:19:22.480 handling used for quite a while. Right. It's still the 0:19:22.760 --> 0:19:25.439 entry level jewel to get people out of poverty and 0:19:25.480 --> 0:19:27.840 supply them most things like wheels that they can drive, 0:19:27.960 --> 0:19:30.240 right and cooking a while, et cetera. So, yeah, there's 0:19:30.280 --> 0:19:31.680 a lot of good in oil. I guess you've just 0:19:31.720 --> 0:19:33.720 got to think about how it can be extracted in 0:19:33.720 --> 0:19:36.320