Thread by @Big_Orrin

1.

Had a few comments about me asking whether peak supply may come before peak demand. So I thought i would write in more than one tweet what my theory is. And it is only a theory.

#OOTT

2. Over the last 6-7 years investment has been low and we have not seen its effect yet. Shale growth covered the demand growth but other projects covered the loss of crude oil as fields started to age and degrade.

3. The lack of investment means that at some point he projects needed to cover the degradation and ageing of fields will just not be there to cover these losses. Shale will grow but shale was a very specific period of time due to capital availability.

4. Shale will grow again but it will be limited by the price of natural gas, NGL’s and capital not just the oil price (see @anasalhajji ).Therefore, before any new production can catch up, oil supply would create a supply hump where some later years will be lower than earlier one

5. In normal times the supply hump would mean supply does not meet demand and inventories are drawn down. It would also mean prices would go up and bring more investment in and the supply curve after a dip would continue to go up.

6. But this is not normal times. There is an energy transition going on and everybody expects a peak demand to be reached. The one thing that will bring peak demand forward is high oil price.

7. Therefore, the lack of investment and ageing fields over the last 7 years or so, may create the situation that brings peak demand forward. Therefore the supply hump actually turns out to be the peak supply.

8. In other words an unexpected peak supply comes first and creates peak demand.

9. Add into the fact many of the usual players that would be developing oil fields are backing out of e&P and there leaves a gap from who will fill it. BP, Shell are all moving towards the energy transition and NOCs don’t have the money. Will take time for new players to enter

10. The problem is that time is the great problem. There may not be the necessary up to 10 years needed to bring some of the more difficult sources of oil online before peak oil.