New Directions in Global Oil

New Directions in Global Oil, the April issue of TerraJoule.us, reviews the expanded supply capabilities created over the past five years by the global oil industry. Because North American oil supply growth, however, cannot be expected to continue during a low priced environment, we speculate OPEC will be successful in its quest to win back market share. More broadly, TerraJoule.us concludes that the forecast for global oil production over the next five years will essentially track global growth. If global GDP weakens, oil supply will guide downward. If global GDP strengthens, oil production will advance, and supply the global economy with oil at an affordable price. This new equation is made possible by the intersection of new production capacity with the phenomenon of energy transition, in which oil itself has lost market share every year since the start of the new millennium.

In the second essay of this month’s issue, “The Path We Are On“, we welcome back new writer and analyst Justin Ritchie, of the University of British Columbia. Mr. Ritchie’s essay focuses on the four main pathways of future GHG emissions, and asks questions–in light of slowing global economic growth–about the probabilities of future demand growth for fossil fuels. Again, given the energy transition already underway, Ritchie’s essay, along with this month’s issue, calls into question wildly high projections for future energy consumption. This is an important topic, that probes issues surrounding the tendency to extrapolate past growth into the future.

In the continuously updating TerraJoule.us Global Grid Decarb Monitor, projections for marginal growth from wind and solar are largely maintained for both 2016 and 2017. We maintain our view of better global growth next year. And one note of interest here: new generation from solar in 2016 is forecasted to exceed new generation from wind power.

Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, stands at 97.54 having started the new year at a notional value of 100. The Index plays a favored super-theme of TerraJoule.us: that the global economy is transitioning away from liquid fossil fuels, to the powergrid. And, that the costs of fossil fuel extraction and combustion increasingly place the energy-capture technologies of wind and solar power in a favorable position. Industrial names in the index continue to perform well in 2016, while the basket of solar equities continues to underperform.

–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.