Category: Oil and Gas

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Bitcoin halving twice as good for Web3 Games this time around

Joonmo Kwon, founder and CEO of Web3 gaming platform Delabs Games, predicts that this week’s Bitcoin halving will see funds pouring into the Web3 gaming industry.

“The heightened market enthusiasm and increased capital inflows into the cryptocurrency space resulting from the halving event could translate into more significant funding and advancement for Web3 gaming initiatives,” Kwon tells Web3 Gamer.

“As altcoin market dominance and market capitalization climb, there is typically an increased interest and influx of capital into gaming tokens,” he says.

Kwon points out that blockchain gaming is in a totally different position this cycle than during previous halvings.

“While previously dominated by casual and puzzle games, recent developments have expanded into genres like FPS, MMO, and RPGs. The gaming sector has made significant leaps forward compared to previous halving events.”

With Bitcoin soaring to new all-time highs recently, Kwon hopes the shine could rub off on blockchain gaming but adds that the correlation between the two is only moderate. However general bullishness and optimism is a rising tide that lifts all boats.

It comes at an opportune time. Blockchain gaming received $288 million in investment in the first quarter of this year, which was a steep 57% drop compared to the previous quarter, according to a recent DappRadar report.

Investments in Web3 gaming and metaverse Projects in Q1 2024 (DappRadar)

But some projects still managed to score big bucks to kickstart the year.

Gunzilla Games secured a $30 million investment round for its upcoming project, Off the Grid. Parallel Studios, the team behind the Ethereum NFT card-battler game Parallel, completed a successful funding round, securing $35 million. 

Shrapnel game’s ‘simple’ secret

Don Norbury, head of studio for the highly anticipated AAA first-person extractor shooter game Shrapnel, reckons game developers have to block out the noise and just remember one thing if they wanna churn out a hit game.

“Gamers play video games to escape from the real world and shoot things, it’s that simple,” Norbury morbidly tells Web3 Gamer.

“Good developers on Web3 gaming projects get that now and are working to create blockchain games that are simple to use and actually fun to play,” he explains.

He isn’t impressed with the overly convoluted mechanics that many Web3 game developers have used in their games.

“Stupidly complex in-game mechanics and the fact that generally, up until now, Web3 games have been boring to play, has led to core gamers justifyingly rejecting the genre,” he says.

It’s a long running issue, with both developers and gamers complaining about the lack of enjoyment in blockchain games to date.

Shrapnel’s been dubbed as the Web3 version of Call of Duty (Shrapnel).

Possibly as a result, he’s not worried about the competition to Shrapnel in the Web3 gaming industry for Shrapnel and says he’s hoping for everyone and anyone’s success.

“I honestly feel like we’re too early to have any contenders in this space, and I’m rooting for everyone,” he claims.

Two games he’s especially excited about are Gunzilla’s cyberpunk battle royale shooter game Off The Grid, as well as the multiplayer online battle arena (MOBA) and collectible card game Wildcard.

“The Division with a Blomkamp vibe and a stylized third-person MOBA with a pro team behind it? I’m here for it,” Norbury proclaims.

But Shrapnel certainly seems to have the edge on most titles, having been hyped up for some time.

It was awarded the “most anticipated game” title at the GAM3 Awards, thrown by Polkastarter Gaming, all the way back in December 2022.

The game’s been in the works so long that its fictional “futuristic” setting of 2044 is edging closer to “present day.”

Fortunately, they’re aiming for a full launch in 2025, and they’ve just rolled out early access to the game, so players who can’t wait can get a sneak peek of what’s in store.

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The team hasn’t been sitting around twiddling their thumbs however, quite the opposite.

“Our team is switched on constantly and it’s difficult to switch off. We love what we do and believe in what we’re building,” he says.

“Our core team is about 70 people, mostly on-site at our studio in Seattle. We have about the same amount again in the form of development partners around the world,” Norbury explains.

“I get calls, messages, and ideas no matter the day or time and it’s always a blast,” he says, before adding the HR department rider that: “We have a great amount of flexibility afforded to the team. Personal lives, family, leisure time, and space are important.”

Shrapnel is one of the most hyped-up games for 2024 (Shrapnel)

Hot take: Rumble Racing Star

Fed up with the same old Ferraris and Lamborghinis in racing games? 

Ever fancied tearing up the track in something a bit more down to earth, like a lawnmower? 

You’re in luck, thanks to Delabs Games’s Rumble Racing Star. It’s a blockchain game based on Polygon where you compete against others online, level up, and pimp out your lawnmower to look its best.

Zooming around on a lawnmower at a way faster speed than my uncle ever does on his farm is pretty entertaining.

The picturesque country setting adds to the charm of Rumble Racing Star (Rumble Racing Star)

When I was zipping around on my iPhone, I couldn’t help but crack up. Amusement aside, the game is also good where it counts.

There are different game modes, but the best is definitely the online mode. 

You can compete against up to 10 players online, and with everyone squeezed onto a cowboy gathering track, it gets pretty wild.

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There are also practice game modes for those who just want to sharpen their lawnmower driving skills.

The circuits can become quite chaotic in the game occasionally (Rumble Racing Star)

The graphics are really sharp and crystal clear, doing laps around your typical-looking western festival. And with the sounds of country music in the background, it feels like you’re right in the middle of a cowboy fair.

You also get to choose your cowboy-style character, and they throw out some funny quirks while you’re waiting for the games to start, adding a bit more flair compared to your usual boring driverless car racing games.

It’s like Mario Kart meets the Wild West, where you’re able to throw everything from a hammer to a bowling ball to a purple can at your opponents. You’re also able to use “special skills” to outpace other players on the track.

Having stuff to chuck definitely helps in getting rid of opponents (Rumble Racing Star)

On top of that, you’ve got elements from Excite Truck and Red Steel filtering through the game’s look and feel.

Overall, it’s a fun and super quirky game. If you’re into standard car racing games and want to try something a bit different, this could be just the game for you to check out.

Other News

— AAA game studio Ubisoft is closer to releasing its first blockchain-based game after releasing the first gameplay trailer for Champion Tactics Grimoria during Paris Blockchain Week.

— Web3 Gaming studio Gunzilla Games has announced a partnership with NFT marketplace OpenSea.

— Mysten Labs has announced what it claims is the first handheld gaming device with Web3 capabilities, called the SuiPlay0X1, powered by PLAYTR0N.

— Move-to-earn lifestyle app StepN, based on the Solana blockchain, is airdropping 100 million FSL points, worth approximately $30 million, to its users this month.

— Immutable, Polygon Labs, and King River Capital team up to establish the Inevitable Games Fund, a $100 million early-stage fund aimed at supporting founders in the Web3 gaming industry.

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Ciaran Lyons

Ciaran Lyons is an Australian crypto journalist. He’s also a standup comedian and has been a radio and TV presenter on Triple J, SBS and The Project.

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Today, some bite sized energy-related pieces because some days that’s all I can handle. It’s like the difference between walking past a road-killed deer and spending the afternoon with one. You’ll see what I mean.

Is growing AI power demand a problem or… did he really say that? 

Once, not long ago, there were a few of us braying in the pasture about what AI was going to do to energy/power demand. Now the chorus is much louder, less theoretical and much more precise. An AP/Reuters article notes that a year ago, two of the top 10 US electrical utilities mentioned data centres as a main centre of growth; in recent conference calls, 9 out of 10 did. NextEra Energy, an energy powerhouse, said it had 3 Gigawatts of data centre power demand in its queue, the equivalent consumption of all the homes in Minnesota. Global power consumption for data centres is expected to grow form 15 Terawatt-hours (TWh) in 2023 to 46 TWh in 2024. The CEO of microchip company ARM, a huge global tech company worth more than $120 billion, recently said in an interview that “AI models are just insatiable in terms of their thirst for electricity…the more information they gather, the smarter they are, but the more information they gather to get smarter, the more power it takes.” He speculated that “by the end of the decade, AI data centres could consume as much as 20% to 25% of U.S. power requirements. Today that’s probably 4% or less.” One large energy company, Dominion Energy, whose assets include 27,000 megawatts of power generation, 6,000 miles of electric transmission lines, and 54,000 miles of power distribution lines, said that it has agreements signed for data centre growth  that will use the equivalent of 35% of the electricity used during last winter’s cold snap. In other words, a bolt-on of 35% more demand. Elon Musk recently said, in Elon’s way, that GPUs are “currently harder to get than drugs” and that while 2023 was marked by a shortage of chips, two to three years out will be marked by a shortage of electricity. 

Those are some pretty sobering statistics, from a wide spectrum of people in the know, but, of course, look what happens when the net-zero 2050 bandwagon hears this. Uh-uh, they say, can’t happen, it ruins our storyline. Renewable energy super-advocate Jesse Jenkins, professor at Princeton University and highly influential in current US energy policy, scratching his jaw inattentively with the femur of a peasant someone in the anthropology department traded him, probably, mused on Twitter: “Will the rise of AI break the grid? … Are we facing a supply crisis—or is it a sales pitch meant to build more gas plants?” This Vaudevillian query is attached to a podcast entitled “Skeptic’s take on AI and Energy Growth.” Sigh. It’s like everyone is standing around the poor dope saying “Hey your house is on fire,” and he’s saying “Yeah whatever, you just want me to run out so you can go steal my socks.”

I do read what these people have to say, and how they think. They simultaneously hold a toxic combination in their heads: a belief that we are all doomed imminently from climate change, that every storm/drought/flood/whatever is a consequence of climate change (they stand silently by while the media amplifies this nonsense, or spurs them on), and that policy can accomplish the environmental goals they deem necessary. They then work back from their preordained conclusion to rubber stamp anything on the ‘right’ path, and plow under anything that objects. They dismiss insurmountable challenges with the wave of a hand, for example brushing aside the question of inadequate minerals with a platitude out of the economist’s bucket: “high prices ensure new supply will arrive.” When the CEO of one of Rio Tinto, a global mining giant says that the gap between required and actual mining investment is “humungous” and that the world isn’t just facing a shortage of minerals but the capital to build new mines, such concerns are brushed off  and downplayed. Because in the ruling class, the musings of a PhD trump an industrialist’s spreadsheet every single time.

As noted, Jenkins and his brothers in arms are highly influential in US federal energy policy. Canada is worse, with a self-proclaimed Greenpeace activist running even faster towards the wall. Buy that wood stove.

Gold hits record prices and even energy investors should care

No one really knows why gold is going up; some headlines speculate that it is due to Middle East tensions or Chinese economic challenges, others that it is central banks buying up gold for one reason or another… my personal favourite is that it is because Costco now is selling gold and, in the Costco way, the bricks are wayyyy more than you need but it’s just so easy and tempting. But fundamentally, gold goes up because people or institutions are looking for something tangible and timeless as a store of value and they don’t trust Bitcoin yet. A major reason people are looking for such tangible value is because they are watching in horror what the world’s leading governments are doing to not just their currencies but governance in general. In North America, the US and Canada are run by absolute clowns, and might well be indefinitely, that are racking up debt at an astonishing pace to pacify social/enviro justice warriors who can never be pacified, and invest in things that have little or no economic return. Think of using a credit card to pay for not just groceries but lawn ornaments as well, with no intention of ever paying down the debt. The EU’s governance is the only thing that makes North America’s leaders look halfway sane; almost anyone on earth can look at what Germany is doing to it’s economy and energy system and see that common sense has packed its bags and fled the country. So: debt is out of control, CO2 emissions are dominating western governments’ visions at any cost, and productivity is falling except in the weird areas where AI is going to do something positive. Interest rates are high, to fight inflation, which governments are pretending they have under control because they have to – debt and the attempts to control the economy going far faster than what their ship was designed for and don’t want to admit it. They are driving up the price of the very component required for successful western civilization: energy. And AI is, as noted above, going to suck up a lot more power. 

Gold might not make a lot of sense as a productive asset, but apparently people and governments are saying, well, it sure as hell beats having exposure to the imbeciles running the show. Anyone that produces energy should take heart; the world is understanding your value at a rate that is increasing just as fast as government debt.

Budget day

Speaking of imbeciles, and debt, today in Canada is national Budget Day, and we are all cowering in our respective corners. In a bid to rise out of the muck of the depth of popularity polls, Canada’s federal government has been handing out daily allotments of billions in a frantic bid to win votes. On Budget Day, we learn how the clowns explain how they will try to pay for it all. They do not understand at all the concept of not killing the golden goose, but they have the reins until late 2025. The US – in the midst of its own too-bizarre-for-words election – may soon have to deal with thousands of Canadians fleeing over their borders as well. Will it be ok if we bring firewood instead of fentanyl?

Middle East

I had a pretty comprehensive solution written out on a scrap of paper somewhere but can’t find it at the moment.

 

Like a fine wine, getting better with age… Energy meets humour in “The End of Fossil Fuel Insanity”, a timeless classic that should be on every book shelf alongside classics such as War and Peace, The Adventures of Huckleberry Finn, and The Idiot, none of which was selected lightly. Available at Amazon.ca, Indigo.ca, or Amazon.com. Thanks!

Read more insightful analysis from Terry Etam here, or email Terry here.

By Geoffrey Cann

Managers in oil and gas rely on various rules of thumb to accelerate decision making, but at times these biases get in the way of making better decisions. Biases that were at one time helpful are now a kind of risk.

In 2017, I was invited by the International Energy Agency (IEA) to contribute to one of its major studies. They had been reading my weekly series on the impacts of digital innovations on oil and gas, and they felt I could make a contribution to their assessment of digital’s potential to improve the global energy industry.

At the workshop sessions hosted by the IEA, I was quite struck by a comment made by the head of the digital delegation from one of the global super majors. He said that unless the super major had clear line of sight to a billion dollar impact from a proposed digital innovation, they were highly likely to give it a hard pass.

That’s a pretty high hurdle. I suppose the logic was that any digital innovation needed to compete on equal terms with their other investment candidates, such as opening up some new off shore field, or building a new LNG plant, or debottlenecking a refinery. Even so, there are few innovations in digital that could possibly hit this target on a short runway.

This bias—applying borderline unachievable targets to candidate investments in digital technologies—served to keep the company from ever Investing in anything very innovative.

The IEA story parallels one I heard from an investor who was concerned that his portfolio analysis team was systematically avoiding investments in digital innovation in favour of more traditional opportunities. To test his hypothesis he constructed a pitch off for his analysts using MBA students from a local university. The students were instructed to pitch camouflaged versions of Facebook, X (Twitter at the time), AirBnB, and Uber, and a few other wildly successful digital plays. As expected, his analysts turned down every single investment opportunity.

I see these kinds of biases playing out regularly throughout the industry. Here are a few of the more common ones

The dominant bias in the industry is to favor volume above all else.

I totally get why production volume is the first priority for upstream companies. Reservoir decline curves force companies to replace production every year, ensuring that production proposals receive priority treatment. Reserves on the balance sheet create no value until they are converted into revenue via production, which also favors production proposals. Upstream engineers grow, both in wealth and professional capability, by managing increasingly larger budgets and more complex projects, often related to production.

It is the same in the midstream (pipelines, gas plants, refineries, LNG facilities). Midstream companies grow by putting shareholder capital to work in the form of infrastructure. It is the project managers and engineering teams that gain professionally by translating that cash capital into steel and cement.

This bias to absolute production volume crowds out investments that are not related to production. Digital ideas that might improve production or operational efficiency but fall short of replacing the natural decline curve loss in the short term will trail investments that do. In my experience there are few digital innovations that feature the dual impacts of improving productivity or lowering costs, and simultaneously converting a balance sheet asset to income.

And yet, after a dozen years, the market value of the top six digital companies is now US$12.6 trillion, an order of magnitude greater than a century-old oil and gas super major.

There’s an old joke about the mythical oil and gas Olympics—no one wants the gold medal and everyone competes vigourously for the silver. This bias surfaces in the requirement that any proposed digital innovation must already be deployed somewhere in the industry, ideally more than once.

This bias to the proven means that truly novel innovations that could ultimately confer an early mover advantage, create a scale effect, or lead to a permanent structural shift in the industry, rarely (never) get a look. Following the leader can work, but there first needs to be a leader.

Underlying this bias is the reliance by the industry on the waterfall method of change, where a change moves progressively through stages of increased elaboration and stage-gate stop-go decisions. Digital innovations follow an iterative development approach, and truly breakthrough gains may not become apparent until several iterations have been completed.

This bias is a flip on the ‘not in my back yard’ or NIMBY maxim. Instead, the industry has an overwhelming preference for those innovations that originate in the industry, or ‘only from my back yard’ (OFMBY). Good ideas from outside the industry are viewed with deep suspicion. An illustrative example is cloud computing, which has been in existence as a service for 15+ years, and is even used by many organizations whose information assets are highly sensitive (national security and banking). Despite this track record, 60% of oil companies only started to deploy cloud computing during the recent pandemic because they were forced to.

The bias to copy only innovations from others in oil and gas mean that good ideas from outside the industry are weakly considered, or more likely dismissed. But oil and gas is actually a composite of many industries—real estate, manufacturing, construction, supply chain, transportation—and innovations from those sectors do apply.

The industry’s natural bias towards secrecy and confidentiality works against digital innovation suppliers. Suppliers of innovation to the industry, particularly small technology companies, are often prevented from advertising their successes via such mechanisms as press announcements. In-house legal counsel, public relations or investor relations can block a business unit from making public statements about their success with a digital innovation.

I see this play out on my weekly podcast. The majority of the guests on the podcast are what I call innovation supply side, and very few are innovation demand side. This is certainly not intentional as the voice of the customer is of vital interest. Virtually all of the supply side guests tell me that they can’t convince their customers to appear on camera to say anything nice about the innovation.

This bias has several side effects. Innovators struggle to convince other companies to give them a try when the initial customer refuses to reveal their success. Venture and private investors won’t invest because they can’t see a positive market impact. Employees in the innovator company become discouraged when customers privately rave about their work, but refuse publicly to even acknowledge their existence.

I’ve worked in many industries (automotive, healthcare, consumer goods, retail), and the sense of urgency that informs the rhythm of competitive industries is lacking in energy. There is a built-in bias to slow and steady. After all, demand is largely inelastic. Pricing is set by the commodity market. The resource is secure and on the balance sheet. Competitors take years to build their assets and enter the market. Few big energy businesses have ever gone bankrupt because they took too long to do anything.

In contrast, this bias to dawdle is really destructive to digital innovators who are usually financed hand-to-mouth. Go-live is key because they rely on the monthly recurring revenue. Getting the next client is contingent on getting the first (see Go for The Silver above).

These biases are really hard to combat because they are rooted in mental models of how the world works, and are often based on logic that was at one time sound. It requires leaders to challenge decisions, maintain vigilance through multiple budget cycles, and sustain effort to change ways of working.

Here are six tactics that industry leaders deploy to counteract the natural biases in the industry.

Set aside budget for innovations. Protect the budget from corporate raiders. Build some of the expected results from digital innovations into the committed financial forecast to make it painful to pull the financing. Invest in innovators.

Challenge the project portfolio to make sure that digital spend is not being systematically eliminated from the future.

Ramp up your efforts to promote your digital suppliers publicly because your success working with them is ultimately dependent on their long term success in the broader market. Showcase their logos as partners on your website, issue frequent joint press releases, and appear on their publicity initiatives (such as my podcast!).

Simplify the digital innovation business case. Instead of demanding a detailed business analysis consistent with proposals normally requiring board approval (as is the case with capital spend for new production facilities), create a simplified application that is easy to complete. Allow for greater uncertainty in expected outcomes by accepting that the innovation will improve as it iterates.

Thin the approval hierarchy for digital spend to as few levels as possible. Instead of multiple layers of management who have to approve a digital investment (and feel compelled to alter it slightly as a condition of acceptance), reduce to one or two only. In particular, eliminate the typical requirement that any innovation be backwards compatible with every prior technology investment.

Shorten the approval timeline to increase the urgency. Instead of forcing all digital proposals to fit within the normal oil and gas annual budget cycle, allow for continuous consideration of good ideas.

When times are stable, biases are perhaps a convenient way to facilitate decisions and gain unanimity at the management table. However, the industry is facing far greater complexity than in the past, and such biases are now a risk to be managed.

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In early March 2012, Iranian media incorrectly reported an explosion on one of the main crude oil pipelines in the Kingdom of Saudi Arabia (MEES, 5 March 2012). International news agencies reported the Iranian claim, which led to a $7/B increase in the price of oil in one day.

In putting out this fake news, Iran had a political motive. At the start of 2012, the international community was trying to prevent Iran from developing a nuclear weapon and had imposed economic and energy sanctions on Tehran. Iran, for its part, wanted to make that boycott costly, including through high oil prices.

The relationship between the petroleum industry, politics and the media has become increasingly important. With the rise in the use of petroleum at the beginning of the twentieth century, this troika deserves special attention on the political, economic and media levels.

At the start of the 20th century, John Rockefeller established a company that effectively controlled the petroleum industry, the Standard Oil Trust. In order to break this monopoly, US journalist Aida Tarbell launched a media attack on Rockefeller and his company, claiming that the company’s monopoly was not in the interest of citizens. Her argument received great support from some American politicians, and later a Supreme Court decision was issued in 1911 to break up the monopoly and transfer it to a multitude of companies, including the forerunners of modern-day IOCs ExxonMobil, Chevron and ConocoPhillips.

In the decades that followed, oil gained in importance and consumption grew rapidly throughout the world, and with it its political clout. The petroleum companies became the largest and most important players in the global economy for several decades – a role that is now held by the technology and information sector.

Post-Standard Oil, the Western petroleum companies known as the Seven Sisters had absolute power in the petroleum market. In early 1959, the companies decided to reduce oil prices by about 10 percent, negatively affecting the income of the producing countries. Here began the story of the establishment of the Organization of the Petroleum Exporting Countries (Opec). US journalist Wanda Jablonsky played an important role in bringing about the rapprochement between Abdullah al-Tariqi, the Saudi Minister of Petroleum at the time, and his Venezuelan counterpart, Juan Pablo Perez Alfonzo, during the Arab Petroleum Conference in Cairo in 1959.

It was during that period that we saw the emergence of specialist energy publications, starting in 1957 with the Middle East Economic Survey, now MEES, established by Fouad Itayim with the support of Aramco, which at the time was owned and managed by US companies. It was followed in 1967 by Petroleum Intelligence, one of the most important publications of its kind.

In the 1970s and the decades that followed, the connection between oil and international political developments increased, and this included, for example: the 1973 Arab-Israeli war, the Arab oil boycott of countries supporting Israel, and later the Iranian revolution, and the Iraqi invasion of Kuwait, all of which were ostensibly triggered by oil issues.

Among recent events that have had profound impacts on oil markets was the Covid-19 pandemic, which caused a collapse in oil prices in 2020. This was followed by the Russian-Ukrainian war of 2022 and the ensuing western boycott of Russian oil, and in 2023 by the Israeli war on Gaza and Houthi attack on ships in the Red Sea, all of which elevated oil prices.

In the 1970s and the decades that followed, there was an explosion in the energy reporting sector in terms of quantity and quality, and there was a close connection between the media and research and study centers. For example, price reporting agency Platts acquired US industry analyst Pira Energy Group, was in turn acquired by S&P, which subsequently acquired IHS Markit, a leading commodities and financial information provider. Established international news agencies such as Reuters and Bloomberg also have energy reporting departments, while social media has become a party to oil issues. In July 2018, using Twitter (now X), US President Donald Trump began attacking Opec, and after one of his messages, prices fell by about $8 in one day.

The media serves several purposes, the most important being perhaps building a positive self-image, sending messages indirectly, and influencing the market and prices.

In the future, these interconnections will become even more important. In addition to traditional topics such as energy security and the role of energy in international conflicts, there are two important and interconnected aspects that have special importance:

The first is climate change. There is a consensus among scientists that the earth’s temperature is rising constantly as a result of man-made emissions, most notably carbon dioxide, leading to major negative effects on the climate. This theory is supported by governments across the globe, which have signed up to the 2015 Paris Agreement to limit emissions.

The second, which is related to the first, but is more important and different, is the shift in energy use from fossil fuels to renewable energy, in order to reach carbon neutrality (the transition to an economy with net zero carbon emissions).

How this is best achieved is disputed. Some, like the International Energy Agency (IEA), believe that this can be done by gradually reducing the use of fossil fuels, and not investing in new oil and gas exploration or building additional production capacities.

On the other side of the argument, parties such as Opec see a continued increase in demand for oil, which requires more exploration and production during the coming decades. They argue that without such investments, there will be a scarcity of supplies and a rise in prices, which will negatively affect the global economy. They believe that the best way to deal with the issue is to reduce emissions through several methods, such as collecting and storing carbon, and nature-based solutions such as planting more trees that absorb carbon dioxide.

So what is the solution? The differences between the two groups have widened globally and internally. In the United States, the Democratic Party calls for reducing the use of fossil fuels, while the Republican Party stands against this trend. The media has become an arena for these differences, and at the beginning of this century the anti-fossil fuel side was already gaining ground. But these views are changing as the focus has returned to energy security rather than a rush to adopt policies that may have a negative impact on the global economy.

As a result, the interconnection between the three pillars (oil, politics, and the media) will increase and gain more importance in terms of both quantity and quality in the coming years and decades.

*Dr Ibrahim al-Muhanna is Vice Chairman of the Saudi Association for Energy Economics and author of Oil Leaders. This opinion piece was first published in Arabic in Asharq al-Awsat on April 8.

Enverus Intelligence^® Research (EIR) holds the position that global oil demand will not peak or decline before the end of this decade. EIR’s analysis offers a distinct and unbiased viewpoint, diverging from the two benchmarks forecasters; OPEC and the International Energy Agency (IEA). The IEA’s most optimistic scenario predicts that global oil demand will stabilize at around 105 million barrels per day by 2030, while scenarios aiming for net-zero emissions propose a significantly lower demand. In contrast, OPEC anticipates an increase to 112 million barrels per day by 2030. Currently sitting at roughly 103 million barrels per day, Enverus Intelligence^® Research’s projection points towards a demand of 108 million barrels per day by 2030. This estimate finds a middle ground among the varying predictions, but not by coincidence or through compromise.

EIR has conducted a detailed bottoms-up analysis and found that fuel economy standards aren’t as effective as mandated, while factoring in current electric vehicle sales momentum. Lastly, EIR has adopted consensus estimates for the impact of single-use plastic bans on oil consumption to arrive at our result. Overall, both OPEC and IEA estimates require a significant change in consumption behavior or a reversal of off-oil measures over a short period. History is not in their favor. Our demand forecast results in a world where OPEC’s influence on oil price strengthens, supporting the group’s preference for prices of $85/bbl to $105/bbl. As for when peak demand will occur, we suspect it occurs between 2030 and 2035 as supply costs and availability may combine with off-oil measures to curb consumption in the first half of the next decade.  

You must be an Enverus Intelligence® subscriber to access this report.

Why the Discrepancy?

The emerging difference in forecasts stems from varying assumptions about:

1. fuel economy standards effectiveness,
2. the predicted success of electric vehicle sales,
3. and the progression of economic growth to the end of the decade.

To address the conflict between the expected rise in oil demand and the shift towards environmentally friendly technologies and standards, EIR highlights the underwhelming enforcement of fuel economy standards and the slowing momentum towards the adoption of electric vehicles. From an environmental perspective, reaching our goals for net-zero emissions requires reducing oil consumption starting immediately. However, we project an increase in oil demand by 1.5 million barrels per day this year. Although there is a general desire to lower emissions, there appears to be limited willingness to bear the costs or change habits. Overall, current trends suggest that reducing emissions in the transportation sector might not be achievable soon, even with the introduction of recent fuel economy policies in the United States. Yet, future outcomes could be influenced by the leadership of upcoming US Presidents.

On The Persistence of Oil Demand Growth

Fuel economy standards have underwhelmed. Disparities between real-world performance and stated fuel efficiencies, along with a shift towards larger vehicles, have suppressed the gains in fuel efficiency. This discrepancy is likely due to people buying larger vehicles and the fact that the fuel efficiency advertised doesn’t match the actual performance on the road. While government regulations aimed to roughly double fuel efficiencies for new vehicles, their real-world fuel economy seems to fall short of these ambitious goals. Moreover, despite significant increases in electric vehicle (EV) sales in Europe and China, the growth rate in the U.S. has noticeably slowed, affecting its contribution to decreasing global oil demand. Initial enthusiasm around EV sales, driven by substantial growth rates especially in China and Europe, has waned in the U.S., prompting a reassessment of expectations. Current predictions now adjust the forecast for EV sales to account for roughly 25% of total Light-Duty Vehicle (LDV) sales by 2030, a percentage that is less than President Biden’s 50% target. The evidence of this deceleration is apparent in challenges faced by Tesla and Ford’s strategic pivot towards hybrids, which shed light on the U.S.’s diminished appetite for EVs. However, Europe and China continue to display robust momentum in adopting EVs.

Future Outlook of Economies Around the World

The revised prediction regarding the influence of electric vehicles (EVs) on oil demand , along with factors like economic growth and demographic changes, leads to the anticipation of ongoing oil demand. EIR does not predict the significant shifts in per-capita consumption or the decoupling of economic growth from oil consumption that would be necessary to see a peak in oil demand before 2030. To further explain, the well-documented aging populations in China, Japan, and Europe, coupled with the absence of a younger generation to propel economic activity, serve as barriers to increased consumption. However, this is counterbalanced by the demographic upsurge of younger populations in India, Southeast Asia, and Africa, which will shape the regional patterns of oil demand growth into the end of the decade.

EIR’s report author and director, Al Salazar, succinctly states, “Both OPEC and IEA global oil demand estimates require a significant change in consumption behavior or a reversal of off-oil measures over a short period. History is not in their favour. Instead, we believe the rate of demand growth will gradually slow but not peak. However, the regional dispersion of the growth changes dramatically.”

The Implication of Higher For Longer Oil Prices

Al Salazar suggests that EIR’s forecast bolsters OPEC’s sway over oil prices, reinforcing the organization’s preferred Brent crude price range of $85 to $105 per barrel. This scenario, combined with a possible lack of investment in the global oil supply, could set the stage for increases in oil prices, potentially leading to a peak in oil consumption in the early next decade.

While there is widespread agreement on the need to reduce emissions, this has not translated into a decrease in oil consumption. Current projections indicate that oil demand will remain strong at least until 2030. To achieve the environmental goals that have been set, it will be necessary to see significant changes in behavior and a greater readiness to invest in cleaner alternatives.

Authors:

Al Salazar is a seasoned member of the Enverus Intelligence team, bringing over 23 years of experience in the energy industry with a focus on fundamental analysis of oil, natural gas, and power. Throughout his career, Al has held key positions at EnCana/Cenovus and Suncor, where he honed his skills in forecasting, hedging, and corporate strategy. Al’s 15-year tenure at EnCana/Cenovus was particularly impactful, where he contributed significantly to the company’s success. AL earned his bachelor’s degree in Applied Energy Economics from the University of Calgary in 2000, followed by an MBA with honors from Syracuse University in 2007. Al’s academic background, coupled with his extensive professional experience, has equipped him with a deep understanding of the energy industry’s complexities and the necessary skills to navigate them effectively.

Chris leads the development and communication of the value these products provide various industries, including oilfield services, investment funds, wealth management departments, banks, E&P oil and gas departments, and midstream operators. Chris helps provide customers across the energy ecosystem with the intelligent connections and actionable insights that allow them to uncover new opportunities and thrive. 

About Enverus Intelligence Research
Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, generative AI and energy-dedicated SaaS company, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 98% of U.S. energy producers, and more than 35,000 suppliers. Learn more at Enverus.com.

US Treasury Secretary Janet Yellen recently concluded a four-day summit with Chinese officials sternly warning that Washington will not allow Chinese imports to threaten US jobs in new industries. Yellen ended the visit by urging Beijing to temper excess industrial capacity. 

Although the talks’ focus centered on new industries, such as solar panel production, renewable energy technology, and sustainable industrial production, the treasury secretary also expressed concerns over China’s support of Russia in their war against Ukraine. While no new sanctions were officially mandated against Chinese imports, the serious warning was expressed loud and clear. 

“I Won’t Let “Artificially Cheap” Chinese Imports Threaten US Jobs”

As the US and other nations push towards the energy transition, clean energy jobs in new industries have skyrocketed in the last decade. In 2022, the DOE reported that clean energy jobs grew by more than 300,000 in the US alone. Naturally, these new industry jobs represent a massive portion of the US workforce, potential boons to the economy, and alternative energy capabilities for the United States. However, Treasury Secretary Yellen said President Biden views Chinese imports of new industry-related material as threatening US and other foreign firms. 

Although imports May seem like an affordable solution to increasing demand for renewable energy technology, the cost goes beyond the price tag. Yellen dubbed these imports “artificially cheap” because of their greater impact and threat to American industrial jobs and production. 

A significant portion of the talks was devoted to the production of electric vehicles, batteries, and solar equipment, an area the Biden Administration heavily emphasizes for domestic production. The Chinese government subsidizes the production of such materials, driving a dramatic increase in Chinese companies’ production facilities. 

US Urges a Change in Chinese Production Policy

The Chinese policy of subsidized clean energy production created a boom in clean energy production facilities. Yellen claims this policy led to overinvestment, threatening the global fair market. Meanwhile, the overabundance of Chinese production facilities produces far more than the domestic demand, leading to an influx of Chinese imports. 

Although Secretary Yellen did not threaten any new tariffs or sanctions against Chinese imports, she did warn them that President Biden would not allow “artificially cheap” Chinese imports to overflood the market and potentially threaten American jobs. 

Yellen urged the Chinese government to alter its policy, allowing the United States and other nations to produce energy transition technology domestically. At the same time, she recognizes that the People’s Republic of China will need time to discuss the excess capacity issue and reach a solution. 

She went on to say, “We’ve seen this story before. Over a decade ago, massive PRC (People’s Republic of China) government support led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States.” 

President Biden and Treasury Secretary Yellen aim to avoid a repeat of the “China Shock” of the early 2000s, in which the surge of Chinese exports flooded the market, decimating the economies and production of other World Trade member nations.  

During her second trip in nine months, Yellen claimed the talks prioritized advancing American interests and that other nations, such as European allies, Japan, Mexico, and the Philippines, shared US concerns. 

Difficult Talks About Chinese Support of Russia

In addition to the capacity issue discussions, Yellen mentioned difficult talks over the Chinese support of Russia during the Russian-Ukrainian conflict. After the United States spearheaded multiple sanctions and price caps against Russian oil and other exports, China helped Putin subvert sanctions by becoming a major purchaser of Russian oil. 

While the majority of the talks did not center on Chinese involvement with Russian interests, Yellen made a point of mentioning that it has been discussed. 

Yellen Wants A Healthy Economic Relationship with China

At the end of her visit, Yellen noted that she and President Biden have no desire to untie the mutually beneficial trade between the United States and the Chinese government. However, she expressed a severe warning against overcapacity production. Yellen wants a “healthy economic relationship with China” moving forward. 

Chinese officials pushed back, expressing “grave concerns” over the president’s restrictions on trade and investment. Chinese President Xi Jinping claimed that the Chinese production rate was in line with Chinese goals and concluded that he did not feel pressure to “bend to outside will.”

While the talks concluded peacefully, it remains to be seen how effective Yellen’s warnings against Chinese production will be. 

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