Thread by @GregorMacdonald

Let's play the superlative game: the biggest story in global climate is unfolding in real time right now in China's EV market which is absolutely off the hook. EV (NEV) sales are headed towards 3 million this year, as ICE sales get absolutely crushed. 1/

In my latest newsletter I showed that after ICE sales peaked at 28.1 million units in 2017, China's road fuel demand stopped growing. While we can't count on fuel demand to stay flat (on-road ICE fleet in China is mighty) ICE sales are on course to be < 22 million this year. 2/

Kinda fascinating is that China's data agencies have started reporting electricity demand from the emerging EV fleet. Counter to people's intuitions, it's not much. But it's not nothing. 3 million EV hitting the road in 2021 places roughly 10 TWh of new demand on the grid. 3/

Let's place that in context. China generated 7780 TWh of power in 2020. And as I tirelessly point out, China creates so much new power each year from *wind and solar alone* that it overwhelmingly covers new EV demand. 2020: 61 TWh from *new* wind. 37 TWh from *new* solar. 4/

But what's unfolding right now in China's car market is far closer to some of the heady forecasts from a couple years back, that at the time just seemed dreamy and wishful. 3 million NEV sales in a 25 million unit market already, in 2021? That is absolutely brutal for oil. 5/

Care to make a guess where we're headed, with EV starting to blow past 10% market share in China? How about 7 million EV sales in a 28 million unit market during 2025? Through the lever of petroleum product demand, what is the signal to oil markets from this point forward? 6/

To set the context for oil, here is our current position:
7/

Something folks may not know about me: I used to be an oil market trader 2002-2008. My entire edge was trading against the hatred of higher oil prices, because I knew, and was correct, there was a structural shortage problem. A multi-year problem. What do I see now? 8/

I have never seen the global oil market in its current position: a really scary house of cards, with enormous spare capacity held by OPEC, and "turn it on" flexibility outside of OPEC. And all this is shrouded currently in logistical delivery issues, and high prices. #cuidado 9/

We are therefore exiting the period when early EV adoption globally was unable to have much of an effect on oil demand. Exiting quickly now, more quickly than can be easily absorbed or accepted--to a new domain where EV are like a WTF? Viking Raid on ICE, and oil. 10/fin.