I’ve written before about demand destruction, but with gasoline prices at historic lows right now we are seeing the opposite: demand rebound. Gasoline sales in the United States are approaching all-time highs last seen right before the “great recession.” People are taking advantage of “cheap” gasoline and driving more. As we slowly recover from the recession (economists tell us the recession ended 5 years ago, but it seems like many areas still are recovering) more people are working and commuting more miles.
Car sales are reaching record highs. Americans seem to have completely forgotten $5 gasoline are are buying more gas guzzlers than ever before. Below I charted out the sales of 21 models of muscle cars, full-sized pickup trucks and large SUVs with an average fuel economy amongst them of just 17 MPG. Since 2010, sales of these 21 models have put nearly 18 million new fuel-hungry vehicles on America’s roads. With an average fleet turnover time of 23 years (from a 4% scrappage rate), these cars will be on the road for many years to come.
Part of the reason for this increase in fuel-hungry vehicle sales is sub-prime lending, which John Oliver does a great job of explaining:
With global oil investment budgets being slashed by over $1 trillion dollars, it seems likely that the market will re-balance itself of the next few years and millions of Americans will be stuck with fuel-hungry vehicles as gasoline prices rise again.
As part of my “peak supermajor” project, I discuss the oil and gas production and capital expenditure of the supermajor oil and gas companies from 1900 through the 2nd quarter of 2016.
Please leave me comments below.
Between 1999 and 2014 the liquid oil production rate for the supermajor oil and gas companies was on a steady decline. Between Q2-2014 to Q1-2016 this trend reversed, with liquids production increasing by over a million barrels per day. This increase in production has came on the heels of ever-increasing capital investment, which peaked out in Q4-2013. Since this peak, quarterly supermajor capital investment has dropped by nearly 60%. With less capital invested each quarter it is likely that the total supermajor oil production will return to its long-term downward trend.
Indeed this past quarter may have shown the beginning of the reversal. Supermajor liquids production declined by 7% quarter-over-quarter and increased by less than 1% year-over-year from Q2-2015 to Q2-2016.
Supermajor liquids production increased significantly year-over-year and quarter-over-quarter. This is partly due to a large increase in capital expenditures by the supermajors from 2006 to 2013. Interestingly, this large increase in capital spending has not abated the drop in natural gas production. As supermajor CAPEX spending peaked in in the 4th quarter of 2013 and has dropped by over 50% since, it seems likely that both liquids production and gas production will continue to decline from the historical peaks of 1973 and 2010, respectively.
Today I would like to introduce my “Peak Supermajors” project. The goal of this project is to answer the question “when will we reach peak oil” by studying the production and financial health of the world’s largest oil companies. Because oil is a finite resource, its daily global production will eventually reach a peak. By measuring when individual oil companies reach peak oil, I hope to bring us closer to answering the question “when will we reach peak oil?”
I am beginning my project by analyzing the largest publicly-traded companies: the “supermajors“. These 5 companies – BP, Chevron, ExxonMobil, Royal Dutch Shell and Total – produce nearly 20% of the world’s oil and gas. They are mostly descendants from the original “Seven Sisters,” which themselves were largely descendants of John D. Rockefeller’s Standard Oil Company. These companies are leaders in the industry, both financially and technologically. By understanding the history of these companies and their strategy for the future, we can better understand the historical arc of the broader oil industry. As I fill out the database I plan to expand it to include data from all of the largest global oil companies.
Our house had an old “high flow” shower head. As California is in the midst of an epic drought (despite all the recent rain), I was planning on installing a low flow “aerator” shower head. These shower heads mix in air with the outgoing water to lower the flow rate while theoretically not sacrificing comfort. Compared to a traditional shower head the water pressure felt is higher but the flow rate is lower, so they end up saving water.
But right as I was about to install one I heard a theory that these aerator shower heads actually end up using more energy because the mist causes the shower to feel colder, which means the user turns the hot water dial up, thereby using more hot water, which requires the hot water heater to burn more natural gas (or use more electricity, which burns more coal and natural gas) to reheat more water.
For a number of years now, high-end luxury cars have had autonomous cruise control systems that use lasers or radar to maintain a set distance to the car ahead. Earlier this month Tesla rolled out an autonomous driving mode in its electric cars that takes this a step further. Teslas will now drive themselves on a freeway, accelerate and decelerate on their own and maintain a set distance to the car in front. However, unlike other cars with autonomous cruse control, they will now also change lanes – if you click the turn signal the car will automatically check your blind spot and execute a lane change. This is just one more step toward a fully autonomous car that consumers can buy.
Some of the world’s largest tech companies are working on autonomous vehicles. Google has driven their autonomous prototype cars over a million miles, which have been completely accident-free, except for other human drivers crashing into them. Apple has also been hard at work on an autonomous, possibly electric, car of their own. In all, over 25 companies are currently developing autonomous cars.
Most industry experts believe that fully autonomous cars will be mainstream in just 5 years. Others predict that in 20 years most cars won’t have a steering wheel or pedals and in 25 years most people won’t need a drivers license.
This week I did some work to determine the roll center height of the car and decided on switching from rod end bearings to spherical bearings to improve the tilt angle, while still leaving me with a good steering radius.
Here’s the histogram chart of turning circles for 840 cars currently for sale in North America: