Ambrose Evans-Pritchard’s Toys Thrown Out Of Pram!
By Paul Homewood
h/t Patsy Lacey
AEP throws his toys out of the pram!
From the Telegraph:
The Opec cartel is taking a brave bet that global oil demand will keep rising fast for another 25 years, convinced that fossil fuels will retain their overwhelming dominance over world energy deep into the 21st century.
The Gulf-led group has based its strategic planning on assumptions that the Paris climate accords that came into force last week will largely fail.
It brushes aside warnings that fast-moving technology for electric vehicles and power storage may soon transform the energy landscape beyond recognition.
The group’s 2016 World Oil Outlook released today estimates that crude demand will rise by a further 16.4m barrels per day (b/d) to over 109m b/d by 2040, driven by economic booms in China, India, and the emerging economies.
Opec will enjoy the lion’s share of the expanding market, boosting its output of oil and liquids by 12.6m b/d. Production from the rest of the world will peak within a decade and then go into gentle decline.
The long-range forecast shows the Middle East strengthening its position at the epicentre of the oil industry, as output from US shale and Russian fields reach a plateau, and high-cost drilling in the Arctic and ultra-deep waters disappoints. Oil prices will double to $92 in today’s money by 2040.
The outlook is a far cry from the bombshell warnings by Shell last week that global crude demand could peak within five years, chiefly due to vaulting gains in fuel efficiency and the switch to zero-emission vehicles.
There is already a move in the German parliament with cross-party support to prohibit sales of the petrol and diesel cars by 2030, a move that could set off an avalanche. Volkswagen, Mercedes, and BMW are already joining the race for the electric car market.
Opec says it welcomes the climate deal and will play a part in delivering its goals, but the report’s base case explicitly assumes that countries will not meet their pledges – or even come close – and that business will continue more or less as usual for the oil sector.
It estimates that fossil fuels will make up 77pc of total energy demand in 2040, with solar, wind, and geothermal accounting for a still risible 4.7pc.
Coal will lose some share due to the Paris climate push, but oil and gas together will retain a 52.7pc share, exactly the same as today.
The assumption that there will be no serious disruption to their business models is a high-risk gamble for the oil states. There is already a G20 Task Force studying in the global financial risks posed by the fossil industry.
Mark Carney, the Governor of the Bank England and chairman of Basel’s Financial Stability Board, has warned repeatedly that fossil energy companies are booking assets that can never be burned under the maximum ‘carbon budget’ of 1000 gigatonnes stipulated by the Paris deal.
In a recent speech he said the energy sector faces a "technology revolution" that threatens to sweep aside the old order, noting that three of the four largest coal companies had already gone bankrupt. He suggested that other fossil companies could face the same fate if they fail to adapt in time, potentially leading to a "Minsky moment" or full-blown financial crisis for the world.
Unfortunately, for AEP’s credibility, OPEC are only forecasting what BP did in their Energy Outlook earlier in the year.
Remember as well that their Base Case is based on the Paris commitments being met, and not, as AEP incorrectly claims, assumptions that the Paris climate accords that came into force last week will largely fail.
Even the International Energy Agency, biased towards renewable energy as it is, is forecasting that demand increases to 103 mb/d.
And if oil prices remain low, demand could increase to 107 mb/d.
Add in the strong growth in demand for natural gas, projected by BP, and the OPEC estimates look pretty realistic.
AEP talks about zero emission cars, and German Parliament moves to outlaw conventional cars. He forgets that the EU is increasingly becoming little more than an irrelevant sideshow in global terms.
As for Mark Carney, we are perhaps entitled to question just what he has predicted right since he took the reins at the Bank of England. Certainly his wildly pessimistic forecasts about Brexit, both before and after the referendum, eroded what little credibility he had left.
Which just about leaves him in the same position as good old Ambrose Evans-Pritchard!
I recall our friend AEP writing a few weeks ago that as far as his predictions of oblivion for fossil fuels went, all bets were off if Trump won the election.
Say no more!