Category Archives: Publication

Oil Fall: Part Two, China Sudden Stop

If you’d like to understand better how the introduction of electric vehicles will affect the oil market at the margin, then you should read Oil Fall, a three part series that explains how wind and solar power will jailbreak the powergrid, and find their way into global transportation.

Part Two, China Sudden Stop, is now released and picks up the storyline from part one, California ICE, as China now prepares to kill oil growth in the same manner it killed coal growth, five years ago. China’s domestic war on pollution has already yielded tremendous results and now the country is pressing forward with a plan to divert all future transport growth to electric vehicles. Combined with China’s leadership position in the construction of new wind and new solar, a formula has now been set in motion, raising the risk that peak oil demand will soon arrive.

From the introductory, first chapter:

Electricity is the new oil and no country makes more electricity than China. Having optimized its manufacturing base over three decades to churn out exportable products, China produces and consumes more power than the US individually, more power than North America combined, and even more power than all of Europe. How China generates this electricity, however, is both a problem and an opportunity. Built on a massive, installed base of coal-fired capacity, China’s powergrid is currently undergoing a revolutionary transition towards wind and solar power. The shift––a response to the public’s anger over extreme levels air pollution––largely began its trajectory as a policy response, but now, as in the rest of the world, is gaining momentum as favorable costs and construction timelines to erect new wind and solar begin to crowd out all other forms of new power generation.

China’s ability to effect policy-driven change in its industrial economy, even when constrained by global economic forces, is a capability that’s been put into action several times now. And yet, the world keeps missing this particular China lesson. For example, few if any predicted that China would industrialize so quickly late last century; or, that the country would do so using coal. After 25 years of such policies, China pivoted, after 2010, and started to turn its back on coal. In both cases, analysts made a classic forecasting mistake, calling for a continuation of present conditions, and thereby missing a big turn. Here’s why that matters: in the same way few thought China would have the means, or the intent, to halt coal growth after two decades of soaring coal consumption, few analysts today believe China has the means or intent to halt the growth of its oil consumption.

But China, as it turns out, is in pursuit of the same formula for systemic change now unfolding in California. The country is putting millions of new EV on the road at a time when a soaring build-out of new wind and new solar is generating new and large volumes of clean electricity. This new electricity is looking for a customer base, and, has started to find one in the burgeoning market for electric vehicles. Indeed, there is every reason to believe this new fleet of electrics now coursing through China in a great wave will drive round after round of new generation from wind and solar––a symbiotic relationship of support. Batteries, wind, and solar are already working together to smooth the pathway for soaring demand as costs continue to fall, thus amplifying the trend of systemic change. The future of oil consumption growth in China is now at risk.

As highlighted in part one, Oil Fall, California ICE, the analytical target of this series is not, however, to pick the point in time when China’s oil consumption will fall into outright decline. Rather, China Sudden Stop explains how relatively easy it will be for that country of 1.3 billion people to halt the growth of its oil consumption. Using a term from international economics, sudden stop, part two of the Oil Fall series calls upon the history of energy transition itself to argue that China is rapidly nearing a time when, as in the developed world, its oil consumption growth will convert to an extended flatline, oscillating from year to year, but no longer growing.

Oil Fall is a three part series that will publish over the course of 2018. © All rights reserved by the author and TerraJoule Publishing. Fair use of quotes from Oil Fall are permitted, with citation of Oil Fall as the source, and the author’s name, Gregor Macdonald.

Oil Fall is released in PDF form on the Gumroad.com platform. All sales conducted through Gumroad.com only, and buyers will see a charge from Gumroad on their statements. Oil Fall is best rendered at 100% in Adobe Reader.

Oil Fall: Part Two, China Sudden Stop

–Gregor Macdonald

Oil Fall: Part One, California ICE

If you’d like to understand better how the introduction of electric vehicles will affect the oil market at the margin, then you should  read Oil Fall, a three part series that explains how wind and solar power will jailbreak the powergrid, and find their way into global transportation.

Part one, California ICE, is now released and follows the beginnings of this story from California, which is now producing 20 percent of its electricity consumption from wind and solar power alone, and, which is at the forefront of electric vehicle adoption.

From the introductory, first chapter: 

We have long assumed the most dangerous moment for the oil industry will arrive when demand for its products enters permanent decline. That’s understandable. However, by the time global oil demand actually enters outright decline, the damage to oil prices and the oil industry will have been underway for some years. The pivotal moment for the oil industry—indeed for all capital intensive industryis not the decline, but rather, the transition from positive annual growth to zero growth, or a flatline.

Oil Fall is the story of how near we are to that moment of zero growth. For some, the story will seem improbable. For others, inevitable. It’s a story that begins in California, will soon run through China, and eventually will distribute its thermodynamic savings, and economic change, across the world economy. These three phases of the story will be laid out over three short book installments. And the first, which you are about to read, is called California ICE…

…What’s about to happen in California, and the United States, and then the world more generally with China as a foundational leader, is that electricity—long trapped behind an insurmountable wall—is going to find its way into the transportation sector. The reason to tell this story now is that we are poised at that curious moment when, after nothing happening for a long time, everything appears to be happening at once. California is about to trigger an exceptionally powerful formula for breaking the ringfence that oil has long enjoyed over transportation: new wind and solar power constructed across the state, deployed on the back of plunging costs, is finding its way into increasingly affordable electric vehicles.  The implications are exhilarating for the environment, but absolutely devastating for the oil industry, the existing car industry, and all the infrastructure that is leveraged to oil and gasoline.

But let’s not get ahead of ourselves. Oil Fall doesn’t attempt to model or forecast global oil demand declines, which may not come until the mid-point of next decade. While analysts waste their time trying to figure out, for example, when EV will ultimately take all market share of new car sales, for example, this series will concentrate on the first blow: when oil demand growth falls to zero. That single change alone will do plenty of damage— not only to oil, but to the oil industry’s influence and power.

Oil Fall is a three part series that will publish over the course of 2018. © All rights reserved by the author and TerraJoule Publishing. Fair use of quotes from Oil Fall are permitted, with citation of Oil Fall as the source, and the author’s name, Gregor Macdonald.

Oil Fall is released in PDF form on the Gumroad.com platform. All sales conducted through Gumroad.com only, and buyers will see a charge from Gumroad on their statements. Oil Fall is best rendered at 100% in Adobe Reader.

Oil Fall: Part One, California ICE

-Gregor Macdonald

TerraJoule.us Free Newsletter

TerraJoule.us – A Journal of Energy Transition is a free newsletter that chronicles the rate of our present energy transition, as the world attempts to decarbonize powergrids, and policy amplifies the deleveraging process from two centuries of fossil fuel exposure.

The publication is read by government agencies and NGOs, and, by private investors and individuals at major financial firms, family offices, and pension funds globally from Australia to the US, Canada, the UK, and the EU. Published every two weeks, and edited by Gregor Macdonald, of Gregor.us.

You are invited to have the letter sent to you by signing up here: TerraJoule.us Newsletter

Features include The TerraJoule.us Energy Transition Index (TETRX), composed of both ETFs and individual stocks, designed to include those sectors best positioned to exploit, and also avoid, the ongoing disruption in the global energy system.

While profound shifts in the global energy source mix continue to emerge,  energy transition is increasingly composed of developments and cost declines in technology and infrastructure. Those equations supply both the risk, and the opportunity, as the next tranche of energy users comes online in the global economy.

-Gregor Macdonald, Editor