Welcome to zero. I'm Akshatrati. This week peaks Politics and Predictions. Today we are going to talk about oil. Whether you love it or hate it, you cannot deny that the world needs it, at least right now. And if you care about tackling climate change, then you also need to care about what happens to the demand for oil over the coming decades. Growth in oil demand has so far
been a close proxy for economic growth. While it's clear some of that economic growth and the energy that powered it has been responsible for climate change, it has also pulled hundreds of millions of people out of poverty. As we transition to clean energy, there is now a real prospect of breaking that linkage.
If you're talking about structural decline in oil demand. Until very recently you were talking about structural decline in the global economy. I don't think we are talking about that now because we do have these quite effective substitutes, and they're becoming more effective by the year.
That's David Fickling, a columnist for Bloomberg Opinion and my guest today. He's joining me to talk about peak oil. In a matter of mere decades, the world has gone from the specter of running out of oil to soon being able to choose not to extract every last job, Or to put it another way, the world has gone from watching for the day that oil supply peaks to
trying to predict the day when oil demand peaks. All this matter is because burning oil contributes about a third of global emissions, and getting to net zero will mean finding ways to wean the economy of this still essential commodity. There's also that tiny matter that oil commands the most attention in global geopolitics among all other commodities. What happens to the major oil powers once the world starts wanting
less oil. This week is a good time to talk about it because is the fiftieth anniversary of the OPEC oil embargo in nineteen seventy three, and those powers showing how much of a stranglehold oil can have on the global economy.
The oil producing countries of the Arab world decided to use their oil as a political weapon. They will reduce oil production by five percent a month until the Israelis withdrawal from occupied territories.
As expected, there was a huge reaction in countries like the US.
This is a pearl harbor again, as far as the United States is concerned because of the fact that it invasions a whole change in our lifestyle, a whole change in the way this country has been built.
All that happened because Arab countries were opposing Western countries support for Israel in the nineteen seventy three Arab Israeli war. It's tragic that almost to the date, the region is experiencing yet another war and yet another humanitarian crisis. Back in nineteen seventy three, oil producing nations could use oil as a weapon because supply was an issue. Now David predicts that demand is going to be the issue. That is the day humanity can say, dear Oil, it's not you,
it's me is on the horizon. In fact, last year, David wrote a column where he said pea coil has finally arrived. No really, So I invited David to come on the show to help me understand why the world cares so much about pea coil, why he still thinks his prediction is the right one, and to explore the truly wild world we will enter after oil demand peaks. David, Welcome to the show. Hey, this is an interesting week to talk about what we are going to talk about,
which is peak oil. It is the fiftieth anniversary of a pivotal week in energy history. I'm talking about the nineteen seventy three oil crisis, which began on the seventeenth of October. So can we just start there as a moment in time which changed the world and perhaps bring it to a point where you feel peak oil is a thing that people started to talk about.
Absolutely, I think something we're going to talk about throughout this conversation is about the interplay between supply and demand. The seventy three oil crisis and also the seventy nine to one, which in some ways had a more lasting effect, which is proked by the revolution in Iran. Obviously, they were events in the history of oil supply, but they
had immense consequences on the history of oil demand. If you look at oil demand projections before nineteen seventy three through the fifties and sixties, energy demand was increasing at a rate that looked almost exponential. You had these very dramatic projections about how fast demand energy and in particular oil, was going to go up overcoming decades. And that trend was broken by nineteen seventy three and it's for very
obvious reasons. Supply and availability of oil suddenly looked less secure, and so consumers had to sort of start rethinking a lot of the things that they were doing. So, I mean, the most obvious example of this was that in nineteen seventy three, about a third of the world's oil went into fuel boilers it was producing electricity. That is now
about seven percent of the world's oil. The world has given up on that because essentially after seventy three, European economies, a lot of the US, they turned to domestic coal reserves instead. France turned to nuclear of course famously, and we saw the birth of a lot more investment in renewables, although of course at that stage it was far too early stage. But what we saw was that when you have a supply problem, demand starts to respond. And that's been a lesson that continues for decades.
So in initial days, you know, this is talking from the nineteen seventy era, when the term peak oil was used, it almost always meant peak oil supply. But today we're talking about a very different kind of peak oil.
Yes, absolutely, I mean, in fact, if you look at the projections for peak oil supply, they go back even further than that. At one point, I remember looking at this in nineteen nineteen, the chief geologist of the US Geological Survey said that the US domestic output, this was no one was even projecting anything on a global basis at that point. They said that within two to five years, US oil production was going to start declining. And at that point it was about one million barrels per day.
So it's thirteen million barrels per day now more or less.
Whether it's in the case of supply or it's in the case of demand. We care a lot about pea coil. Why is it that we care so much about pea coil?
If you look around you you can see how important to US oil is in all sorts of ways. From the consumption point of view, obviously the cars we drive, the consumer products that we have. Oil is in a vast array of uses. It's not just cars, it's the trucks that drive things, the planes that we fly, the ships that move things around. Also like the plastics and consumer goods, the greases, the asphalt on the roads, it's everywhere.
Of course, From the climate perspective as well, oil is one of the largest contributors to climate change, and that's something that we need to reduce. So before we were worried about peak oil supply, we were worried, gosh, we're not going to be able to have all these useful consumer goods that oil provides us. We're less worried about that. Now we're more worried about the fact that oil is
actually destroying the environment around us. We are concerned about ways to substitute and reduce substitution is I think the thing that's really changed in this area when we're talking about peak oil demand. There are alternative ways of doing the things that oil does, for instance, electric vehicles, bio fuels in conventional vehicles, and alternative feedstocks like hydrogen for the chemicals industry. And that's what's changed at the moment.
So you published a bold article last year which started with sort of a trepidation. Yes, it said, I'm going to make a bold claim, and I may come to regret it, but my bold claim is that peak oil demand is here. Twelve months on, tell us why you thought peak Alderman is here, and do you think you're still right?
Sure? Yeah, well, yeah, I mean the main reason I wrote the column at the time was that it was a period of very sharp tightening by the US Federal Reserve, and at that point everyone was predicting that the world was going to face quite a severe global recession, really on the scale of the Volka Recession of the early eighties.
You know, this was when Paul Volka, the US Federal Reserve governor, tried to stamp out inflation in the wake of the nineteen seventy nine oil crisis during the Irana ark War, and that's one of the most dramatic reductions
in oil demand that we've seen in history. The argument I made at the time was essentially that we saw a recession on that scale that was probably going to crimp oil demands until the mid twenty twenties, sort of twenty twenty five, and at that point we start to see some of these long term factors like rising energy efficiency in vehicles and the rise of electric vehicles, mean that oil is entering a secular decline. Now, there has not been a global session. In fact, the global economy
has grown extremely strongly. We're really sort of above trend growth. However, the specific prediction I made was about crude oil.
Yeah, so let's do that because it is nerdy. Beyond the fact that you can make these pronouncements about peak oil, oil is not one thing. We kind of think of it as a commodity, but it's not one thing. So let's just break it down and then explain to us where you think we have reached a peak.
If you think about how you measure oil, it's actually quite a difficult thing to measure oil demand. And you can go right back to the nineteenth century. You know, John d. Rockefeller and standard oil. John d. Rockefeller was not controlling oil fields all supply. He controlled refineries, and refineries are the bottleneck in the global oil supply chain. So if you want to count how much oil is being consumed, the best way to do is go to the gate of a refinery and measure how much is
coming out of a refinery. And so generally when you hear the OPEC or the International Energy Agency saying like what is the level of oil demand, essentially what they're saying is how many barrels are coming out of oil refineries.
David is making an important distinction here when measuring oil consumption, organizations like the International Energy Agency and OPEC are not counting what's going into the refinery, but what's coming out. For much of history, refineries took in pretty much only crude oil, so the amount of refined products was a good proxy for the amount of oil coming out of the ground. That's changed over the past few decades, and now refined products come not just from crude oil, but
also bio fields and natural gas liquids. And because a barrel of refined products can be made from more than one source, it means there can be a significant difference between the amount of crude ole going into a refinery and the number of barrels of refined products coming out.
Global supply of refined products, so things like gasoline and diesel and jet field and things like that, that's about one hundred, one hundred and one hundred and two million barrels per day. Global supply of crude oil, which is what we think of as oil black stuff, you know, that will fit in a barrel that's subject to opec quotas the stuff that's quoted on the news for the price of West
Texas intoneedit or brent. That's only about eighty three million of those one hundred million barrels, probably a little bit less than that. At the moment crude ol, which was what I made this prediction about. We are still actually below twenty eighteens levels of crude oil demand at this point, and the International Energy Agency, if you look through their numbers, they don't predict that next year we're going to exceed twenty eighteen's levels of crude oil demand. So at this point,
crude ole demand is still below its peak. And there's a lot of headlines you'll see about we're seeing record old demind but that's actually largely to do with growth and biofueld supply and to a similar extent, growth in natural gas. Liquid's not actually in crude oil.
Okay, So what you've just said is basically oil demand, as we understand all kinds of product demand is growing and is at a new peak, but the black goole that is feeding that oil demand has actually peaked. There is all this other stuff, some of which is actually biofields, which is the fastest growing segment of supply. Why have biofields become such a big part of the supply mix?
Biofields is essentially policy. One of the earliest responses to the seventy three oil crisis was Brazil started introducing very dramatic biofield mandates from the nineteen eighties. We've added the US to that in the two thousands. In the late nineties, hardly any US crops went into making fuel. At this point, more US crop volume goes into making fuel than goes into making food for Americans. It's grown to that extent, and we're seeing other countries moving in the same direction.
Just in the past twelve months, India has doubled its biofuel mandate I think, to twenty five percent from ten percent. Indonesia, another big source of transport demand growth, has raised its bar fuel mandate to twenty five and I think is going to fifty percent in the next few years. These are quite significant slices of oil demand.
So if that is the case, and yes, let's assume the total demand for oil will continue to grow as many predictions say it will. But if biofields also continue to grow, why did you feel any trepidation making the claim that crude oil demand has beaked.
I think the reason for that is that every prediction anyone has ever made for history has turned out to be transted wrong. And this is about a series of lines on a chart and the direction that they're moving, and I think if I can give common ground that really very few people would disagree on the amount of liquid fuels demand over the coming decade. The pace of growth has clearly slowed. Even oil bulls would agree about that. And so we're on about one hundred and two million
barrels a day of liquid fuels demand. You don't see many predictions heading much above, say one hundred and five million barrels a day, and maybe some people do predict that, but that's over the previous decade. I think I'll supply increase. Liquid fueld supply increase by say ten million barrels a day. So we're quite close to the peak in that sense. And the question is how much of that peak gets used up by crude oil, how much gets used up by biofuels, how much is natural gas liquids, and how
much is processing gains. The argument I've made is that biofuels, natural gas, liquids, and process and gains, they make up all of that increase in supply.
You might be wondering if having more biofuels in the mix is a good thing for the climate. It's really complicated to calculate how much carbon saving can be achieved with biofuels. What most studies agree on is that biofuels aren't carbon neutral. Just because they come from growing food that captures carbon dioxiet in the process of growth does not mean biofields do not have additional emissions. Processing crops
into fuel requires energy. Burning biofuels creates air pollution. That's why biofuelds for road transport isn't a good solution to pursue in the long term. Instead, it's better to focus on using biofuels to reduce emissions from aviation.
There are more people in the world who are buying vehicles as incomes rise, there are more trucks moving around, people are flying, or there's all those things that are increasing top level demand. But also every vehicle in the world has been getting more efficient. This is actually not
as much about the rise of electric vehicles. It's actually about fuel efficiency rules that have been implemented for about fifteen years Obama era fleet fuel economy rules, similar rules in Europe, the same sort of standards in China, in India. All of those vehicles from the sort of pre two thousand and eight era, they are now being scrapped. They're fifteen years old, and they're getting phased out of the fleet,
and new vehicles are strikingly more efficient. I think if you look at some US examples, a current model car and just I have the numbers here in front of me, Actually, new US cars now travel twice as far per gallon as they did at the start of the Obama administration. And that's just normal US gasoline cars. So that is an incremental reduction in oil demand, and it's nothing to do with electric vehicles.
As we know, there's an explosive growth in the number of electric vehicles being sold. The total oil demand destruction from all vehicles, not just cars, but buses and two wheelers and three wheelers is only about a million barrels a day of oil. So much of the game, so to speak, from decreasing demand has come from as you say, efficiency.
Gains absolutely and so you know, if you break down the oil barrel, about a quarter of the oil barrow goes into gasoline, another thirty percent goes into diesel, and then the remainder about eight percent of it is actually just a fuel that oil refineries use. About fifteen percent is for shipping and for aviation and the rangers, petrochemicals, asphalt,
that sort of thing. So you know, if you look at those different fractions of the barrel, fuel oil demand peaked way back in nineteen seventy nine, Gasoline demand according to the International Energy Agency, that peaks probably in twenty nineteen, and he's already in decline. Road Field demand as a whole is going to peak in the next sort of
four to five years. And of course, the Fatty Birol, the head of the IEA, just said last month that oil demand and here he means not crude oil, he means liquid fuels demand as a whole that is also going to peak this decade.
Just on a sidetrack here, Even as the IEA was born out of the fossil fuel era, in recent years it's become a lightning rod for all kinds of people, first climate people and now oil people, because every pronouncement it makes today it makes for massive headlines in energy press. And so this prediction that Fati Birol made you use this term, which is all fossil fuels will go into
structural decline in this decade, including of course oil. Why is structural decline such an important phrase in there?
I think that is because we have actually seen periods of cyclical oil demand in the past, and this has been driven by these economic factors that we talked about. I mean, essentially, one of the main reasons that people have always been very reluctant to make that call on peak oil consumption is that oil and economic growth. If you track global economic growth and oil supply, they track almost perfect because oil has for so long been the
best way of producing energy, the best energy carrier. If you're predicting peak oil, it's like you're predicting peak economic growth, which is obviously a disaster for the world. And historically we've not had the substitutes for oil that we have right now, and I think that is why it is so important if you're talking about structural decline in oil demand. Until very recently you were talking about structural decline in
the global economy. I don't think we are talking about that now because we do have these quite effective substitutes, and they're becoming more effective by the year. But that's the difference. We have seen these cyclical declines in oil demand. We saw it in the early eighties, when you had the nineteen seventy nine oil crisis. You had the Iuranarak War, you had the Vulka tightening at the federal reserve. We did actually see oil demand decline, but then that decline reversed.
If you remember the old nineteen eighties American soap opera Dallas, Dallas was set in a period of oil decline, it's all about that, the sort of crises in the Texas oil fields, and it covers that turning point actually when the oil market started to reverse and demand started to grow again. Those are the sort of cyclical declines we've seen. We've not seen a structural one, and of course, if you're talking about heading to net zero, a structural decline
is the one that you need. You don't want a temporary blit. You actually need decline to decline forever.
One other thing that came out of the nineteen seventy three oil crisis was the International Energy Agency. If you want to learn more about it, you can listen to an interview with the current head, Fatty Birole, in our archives. There's a link in the show notes. After the break, Humanity says to Oil, it's not you, it's me, in response to the IA's prediction about structural decline in oil demand.
OPEK had an interesting response. It said, it is an extremely risky and impractical narrative to dismiss fossil fuels or to suggest that they are at the beginning of their end. In past decades, there were often calls of peak supply and in more recent ones, peak demand. But evidently neither has materialized, and those are all facts. And yet the tone is an interesting one, a tone that I'd like to explore by just trying to understand what happens after
we reach peak oil. Because maybe you're right that we have reached pea coil. Maybe you're wrong, maybe crude oil demand actually does peak later in the century. However, what is I think no longer a question of contention, is that eventually the demand for oil will peak. What is more interesting is what happens after.
I think the first thing I would say is what does the liquid fuels sector look like after peak crude oil consumption. A crucial part of that is, of course, how fast do liquid fuels decline? And I think the best answer is probably not as fast as we would like them to be declining, because of course you are going to see this decline in transport fuels, which is fifty fifty five percent of the barrel road fuels. Rather, that's going to accelerate as electric cars penetrate and as
the old vehicles get more efficient. But of course you've also got this other forty five percent of the barrel, which is shipping fuel.
And aviation fuel, which we are hearing about in the background.
Yes, right over my house, but yes, you know, forty five percent of the oil barrel, fifteen percent of it is shipping an aviation fuel. Shipping fuel is actually quite an interesting one. We're seeing quite a rapid change in the engines of ships being built with alternative fuels, which is the biggest change in shipping since essentially since Winston Churchill turned the British fleet to oil in nineteen ten nineteen twelve. So that's a dramatic chain. That's only about
eight percent of the old barrel. Seven percent goes to aviation fuel. There is a lot of talk in the industry about the growth of sustainable aviation fuel from biofuels. I'm quite skeptical about that. I think we are likely to see aviation fuel increase quite a bit. Plastics is the other thing. I think we'll probably see plastics increase quite a bit. So really what we're talking about is the decline of the road transport fuel bit of the barrel.
I think there's a fairly straightforward path to getting rid of about fifty percent of oil demand. Beyond that it gets quite a bit more challenging. And of course we've seen with the energy transition that the world is quite good at coming up with solutions for the next sort of slice of emissions that we need to reduce.
And so we really haven't started thinking about the forty five percent of the barrel and how to tackle it. And there is hope given when we come to a problem, we typically do find solutions. It's starting to happen in the cement sector, in the steel sector, but it leaves behind a very crucial question about what happens after, which
is to do with geopolitics. And that would mean only the places that can produce a low cost barrel of oil, which is typically Middle Eastern producers, will be the producers producing most of the oil. That means, as a share of the global supply, their weight becomes bigger and they can use it as a geopolitical weapon. How do you think about the Middle Eastern countries in an era of peak oil demand.
I think that is right. I think if you look at things like cost curves, which is what the industry uses to work out who's most profitable, as you say, the Middle East is at the bottom of the cost curve, it's the most efficient. So I think a lot of projections I've seen OPEC increases its share to about fifty percent over the coming decades, which is at this stage it's about thirty percent, so it's quite a significant increase.
One thing I'd say, though about geopolitics is that the real power of OPEK in the Middle East within geopolitics is about gasoline and the crucial importance of gasoline as a consumer product that affects people's feeling of well being and their political views and whether Joe Biden is going to win the twenty twenty four election and all sorts of factors like that.
Oh, that's very interesting. So you are saying, in a world where oil demand peaks and gasoline it's not the hot topic that a US president won't get elected if the price of a gallon is at five dollars versus four dollars. In that world, a barrel could be two hundred dollars a barrel and would still not make a difference.
Well, absolutely, I think it depends on the share of the population and the sort of pivotal political importance of that share of the population who are using gasoline cars. But I think if you look at a couple of other countries, China, for instance, is an unusually non oil dependent economy today.
It wasn't the case five to ten years ago.
Yes, but actually compared to the US, China is much more dependent on oil imports, which you would think would make it very vulnerable to this. But of course China also doesn't have to worry about democratic elections and the effect of that. But certainly there is not a sort of sense of impending crisis that the government needs to repair when oil prices go up, because most people are much less exposed to oil prices than they are in the US. One area that the US is quite unique
is that the consumer is unusually exposed to OPEC decisions. Basically, so most of the world is not as exposed to the volatility and oil prices as US consumers are.
Right, how do you think geopolitics will play out in an era where demand for oil has beaked and the political connections of gasoline prices in the US are broken.
I think as a subject that affects political outcomes to voters, I think it will clearly that. But I think one area that where we'll see the geopolitics being surprisingly resilient is actually about US involvement in the Middle East. And obviously we're quite aware of this right now because we have a war going on in the Middle East, and I think there is a tendency and you see this in US politics, particularly in this era when Saudi Arabia
is becoming much less friendly to the US. You see a lot of people in America going, why are we so invested in the Middle East? Why are we so involved in the Middle East? They don't share our interests. Most of the oil from the Gulf goes East, goes to China, and our navy is basically providing the security detail for China's oil. Why don't we get China to do it itself? And this is a growing groundswell of opinion.
We see this, and I think, actually, if you think about it, it's quite easy to see why the US is probably going to want to maintain that geopolitical setup in the long term. They do not want China to be providing the security detail to Gulf oil heading EA because regardless of what happens with transport fuel road fuel, oil is also going to remain a pretty crucial war fuel for a long time to come. The military is going to be one of the last to give up
oil as a transport fuel. Now, if China is providing a security detail for oil heading to Asia, that's going to have implications for all the other big oil consumers in Asia. That's going to have implications for Japan, for South Korea, for Taiwan, for all these other allies, and that's going to upset them a great deal as a result. I think if you look in the long geopolitics of oil, control of these sea lines of communication is a very
important geopolitical tool. The US appreciates that a real crucial battleground is going to be the Indian ocean. Who is going to be the naval hedgemon there? Is it going to be the US who has been that naval hedgemon for decades? Is it going to be China, which is where most of the oil are going, or of course, is it going to be India itself, which you would
argue is the natural hedgemon in that region. It's got the land based to maintain that, and that's actually really going to be a very important factor throughout the coming century. Even as Olgamander.
Clients sticking with the idea that the price of oil will be low in a world of peak oil demand, you could also imagine that, given prices will be low, that the transition may slow down in certain parts. India may think we still don't have enough battery metals, we don't have enough lithiuman battery factories, and so we're not going to be able to make as many electric cars. Oil is pretty cheap. Now, let's just keep burning gasoline
for longer. How do you think about cheap oil in a world where we will still need to reach net zero targets and actually cut oil consumption, but the incentives to cut oil consumption from a financial perspective will not quite be.
There as it happens. I would actually sort of challenge the premise a little bit of that. I think like economists generally assume that in a world of declining demand for a commodity, the price of that commodity will naturally be lower. But I think actually if you think about a little bit more. The prices don't come that. They're
not a direct outcome of demand. They're an outcome of the interplay between supply and demand, and suppliers get to adjust the amount of supply they produce according to the demand that they see. And I think the classic example of this that you'll see is of course coal coal consumption, with what we've seen in China over the past year, it's actually creeping up towards its sort of historic peak.
But coal consumption more or les peaked in twenty fifteen, and coal prices have not been structurally drastically low since then. In fact, coal prices in the trading market have often been extremely high. And that's for fairly simple, straightforward reasons. If you think about it, If you're a producer of a fossil fuel and you see demand declining, then you're
going to produce less. And of course, right now, if you go to any Saudi Aramco earnings presentation, you will see Salur Ramco saying the world is not investing enough in oil, and in fact you'll actually see the IA saying the world it's investing far less in oil historically than it has particularly considering the oil price. So the supplies of oil are producing less of it, and they're doing that because they want to keep prices high. Saudi Arabia,
Russia clearly want to keep prices high. So I think the assumption that the pathnet zero is going to be guided by low prices, I think sort of underestimates the extent to which the suppliers of these fossil fuels can see that the writings on the wall and actually respond accordingly.
And that also speaks to the point that many of the Middle Eastern oil producers balance their books their budgets at a much higher oil price. So the Arabia right now wants one hundred dollars barrel because it wants to spend all this money building neon and other projects, and so there is motivation to keep those high oil prices even just to be able to keep doing the things that they do on a.
Day to day basis absolutely And I think a really striking thing that you see in Saudi Arabia, and it goes to this point, is that what are they say spending all these profits that you know, oil is immensely profitable for Sadu arab at the moment and it's using it to buy football teams, it's using it to build cities in the desert, it's using it to sort of cut back on some of the fiscal consolidation that they've
done in recent years. What it's not doing is it's not using very much of it to produce more oil. And historically, when Sadi Ramco is getting the sort of profits it's getting right now, they would be investing a lot in future oil consumption. But if you actually break down what Sadi Ramco is spending on in its capex, quite a lot of it is going on natural gas for local supply, A surprisingly large amount of it is actually going on energy transition projects, on hydrogen and renewables.
Quite a lot of this is going on chemicals and refining, and if you look at the spending that it's doing at the moment, a lot of it is investing in offshore refineries basically as future consumption for Saudi oil. But a really rather small proportion of it is going on actually increasing supply of oil. And of course Ramco always needs to be increased in supply of oil because it's existing oil fields are always declining. And if you're not
investing in increasing supply, then supplies a whole declines. If you look at the behavior of every oil producer in the world out there, even there's this big deal in the market at the moment Exomobile buying Pioneer, it's buying existing production. It's buying a shale oil producer. What it's not doing is investing heavily in these big, long term offshore new oil fields, some of which in place like
Guiana have been very successful for Exon. But by doing M and A of another company, it's basically buying existing production. Is not increasing production.
We're talking about pic oil demand. But in the moment that we sit, there is a spring in the step of the fossil fuel industries, especially the oil and gas industry. And we will be having COP twenty eight in the UEE an oil and gas producer, and that will be headed by the president who is also a CEO of their national oil company. How do you think that's going to affect climate diploma to see ad coptently.
It Clearly you've seen a shift. As you say, there is more of a spring in the step for oil producers. There is that sense that they have the wind at their back. But again I think if you look at actual production, OPEC plus has cut production over the last twelve months, if they've introduced about four or five million barrels a day of oil production cuts over the last twelve months, and the oil price is basically exactly where it was twelve months ago. It's moved around over that period,
but it's actually where it was. So I think the thing that I would sort of worry about more with the energy transition is actually not really to do with the interplay and the energy market at all. It's more to do with trade factors. I think that's the real threat to the energy transition at the moment. It's actually much more the sort of rising levels of protections and that we're seeing that a really choking off the market
in renewables equipment. We're seeing that in the way that the US is apply more tariffs to Chinese solar equipment, the European Union is investigating Chinese electric vehicles, and that sort of thing. That's actually I think the bigger threat, because I think the money is actually already moving away
from oil and towards renewables. I think if you look at investment in upstream oil, there's not enough investment going into fossil fuels to maintain the demand levels that the fossil fuel industry is arguing.
We're going to say, and so, if on the numbers case that you make, and you've made this in a number of columns that you've written over the years, oil producers are not investing more money into new oil production, into significant oil production. Yet on a rhetorical level, they keep saying the world is not investing enough in more oil production. You say that in between the lines, you're reading this as their admission that actually, big oil is kind of here, is going to come soon, and we
just are starting to prepare for the world after. But while we do that, we don't really want to tell anybody about it.
I think it's I think it's very curious, and I don't have like a conspiratorial theory that they're lying to us about what they really think. But there's this concept in economics called revealed preference where you'll say to people, do you want to eat some healthy food or do you want to eat some sugary delights? And people say, oh, I believe in eating healthy food, And then you put a bunch of food in front of them and they just eat all the chocolate, and you call that revealed preference.
There's the thing that you say that you want, and then this is the thing that you actually do. And I think you see an example of revealed preference in the oil market, because, as I say, the last time of prices were over one hundred dollars a barrel, capital investment in upstream oil was close to a trillion dollars a year, I think, sort of eight hundred to nine hundred billion dollars a year. Right now, oil is again around one hundred dollars a barrel, and capital investment is
about five hundred billion dollars a year. It's significantly lower if you look at the way that they're investing. They're not able to justify the level of investments within their own fields to meet this supply, and no one is finding the level of investments that they can justify. And I think that is an acknowledgment that really oil demand is not going to zero, but they're sort of projections where it goes from it's sort one hundred million barrels a day to sort of eighty million barrels a day
over the next decade, and further down beyond that. I think that that's perfectly credible.
When you look at the numbers and we've gone through so many of them, there's always a case, especially in the oil markets, to pick a slice of the numbers and make a case that would be completely opposite to the one you have made today. But it is fascinating that the longer term trends are starting to show up in such interesting ways. And so I'm glad you're on the Pea Coyle beat and I look forward to your
future columns. Hopefully you're not wrong, and if you're wrong, then you'll tell us why you were wrong, and you'll make a new prediction. So thank you for all that insight.
Thank you, Acsha, thank you.
In researching my book Climate Capitalism, I kept coming back to the years nineteen seventy three and twenty fifteen. That's because the OPEC oil embargo in nineteen seventy three kicked off a race to develop alternative energy sources such as batteries and solar. Decades later, when the world finally agreed on a climate goal in Paris in twenty fifteen, those
green technologies were ready to work at scale. Now, fifty years later from that pivotal year and eight years after the Paris Agreement, it's clear those clean energy technologies are finally eating into the world's addiction to fossil fields. Thank you for listening to Zero. If you liked this episode, please take a moment to rate or review the show on Apple Podcasts and Spotify. It really helps and if you write a review, we might read it on a
future episode. Share this episode with a friend or with someone who is a fan of the TV show Dallas. You can get in touch at zero port at Bloomberg dot Net. Zero's producer is Oscar Boyd and senior producer is Christine Driskell. Our theme music is composed by wonderly Special Thanks as always to Kira bindram i'm Akshatrati. Back next week.