SoH Crisis Takeaways: Obliterating Peak Oil Demand, SoH Edition (EP221)

We are now recording an audio version of written posts that we will upload to Apple, Spotify, and YouTube, which you can listen to by clicking the play button above.

We continue our SoH (Strait of Hormuz) Crisis Takeaways series with a check-in on our Obliterating Peak Oil Demand theme that rejects the idea that anyone can know today what decade let alone year oil demand will ultimately peak and subsequently plateau or decline. We have yet to see a scenario from major agencies, banks, or consultants that solves for everyone on Earth some day becoming energy rich, which, in our view, is the ultimate direction of travel. The massive unmet energy needs of the other 7 billion people on Earth points to growth in all current major energy sources and technologies. Energy’s natural hierarchy of needs points to a high motivation by especially billion-person-scale developing countries to crack the code on new energy technologies. How is there still any doubt that we will of course need rising amounts of both traditional and new energy sources and technologies for many, many decades to come?

There is some thought among energy observers that the SoH Crisis will accelerate the timing of “peak oil demand.” It is a view we reject. Even under our base-case of a messy stalemate between the U.S. and Iran and volatile oil flows out of the Strait, we are highly skeptical we could see the kind of sustained, large-scale substitution out of refined oil products into alternatives that would result in even a plateauing of global oil demand at global GDP rates of 2.7% or higher. In fact, growth in EVs (electric vehicles) and LNG (liquefied natural gas) trucks is likely helping economic resiliency in countries like China and others in southeast Asia during a time of SoH-driven stress and therefore keeping global GDP at better levels than might otherwise be the case. The ultimate driver of all forms of energy, including crude oil, is GDP growth. The biggest risk from the SoH Crisis was (or maybe still is) a deep global recession that would hit demand for oil and other energy sources in the short run.

The combination of the April 7 ceasefire and June 17 MOU—as imperfect as both agreements have been—significantly reduced worst-case “$200 oil / global recession” risks. There is also plenty of evidence that neither side is looking for the kind of prolonged full-scale ground war that could drive a more substantial and ongoing disruption of oil supplies out of the region. As such, we are skeptical the duration of the crisis has been anywhere near long enough to accelerate more meaningful behavioral change, even when measured over a longer time frame than just the next few years.

As always, we keep an open mind and welcome pushback or different points of view. With that said, our confidence in this core view has only grown since we first unveiled our “Obliterating Peak Oil Demand” series three years ago (here). We use the popular Q&A format to address the main questions we receive on the failing peak oil demand thesis.

Subscribe to Super-Spiked to receive all content via email. Also available on https://veriten.com.

Question 1 (Q1): You had pushed back on the so-called “peak oil demand” view that was most prevalent during peak “energy transition-climate crisis” years of 2021-2023. Does the SoH Crisis mean “peak oil demand” is back on the table?

Answer (A): No.

We continue to push back hard on the idea that anyone today can model with any certainty when oil demand will peak, plateau, or possibly decline when the unmet energy needs of the other 7 billion people on Earth are as massive as they are. That has been and remains a core ethos of ours. There are no major external forecasters that we are aware of that have modeled full global prosperity—i.e., everyone on Earth enjoying the basic human right of being energy rich.

Q2: Isn’t there growing evidence that peak oil demand is at least on the horizon even if you don’t think it is imminent?

A: No, there isn’t. In