The oil business was never simple or stable. But for the half century after Opec nationalizations and the US-Gulf Arab Petrodollar Accords of the mid-1970s, certain basic parameters did provide a reliable backdrop for trading and investment. Oil demand grew, with occasional hiccups, but a clear upward trendline. Supply expanded to cover demand. Oil was priced in dollars and moved freely around the globe with only a few glitches, caused mainly by US sanctions. With US and Chinese market entry, international gas started emulating that oil model. Now, those parameters have ceased to be dependable for either fuel. Complexity has piled on with the multispeed energy transition and more violent and erratic geopolitics. Letting go of old assumptions is critical to understanding today’s energy scene, as is accepting complexity. But the industry still needs guideposts. The popular maxims “be flexible” and “go local” may be as good guideposts as you’ll find.
It's easy to list the certainties that have ceased to be certain. Many forecasts suggest oil demand growth is nearly over. Even Exxon Mobil, the great oil bull, sees demand peaking this decade. The rapid electrification of China’s own transport sector — covering heavy trucks as well as cars — and the cheap, high-performing models its automakers are selling abroad, are further evidence. A global economic slowdown, which some organizations like the World Bank predict, may bring the end-of-oil-demand growth closer than the “by end-decade” timeframe still widely cited. In the old days, a recession-related dip in oil demand was just one of those occasional hiccups. Now, it could trigger a forever downward trendline.
