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World’s Most Optimistic Oil Trader Turns Bearish

For virtually all of his career, legendary oil trader Andy Hall was a permabull when it comes to the price of oil.

While that served him well for much of the past three decades as oil prices rose alongside China's ascent and relentless demand for crude, resulting in a personal fortune and making Hall one of the richest and most successful commodity traders in the world, it also was the reason for his demise, when after several years of declining oil prices following the OPEC near collapse on Thanksgiving Day 2014, Hall - who was unwilling to change his bullish outlook - was forced to shutter his Astenbeck hedge fund for good in 2017, "a capitulation of one of the best-known figures in the commodities world" according to Bloomberg.

Since then Hall has kept a low profile, but he finally emerged last week in New York... as an oil bear, and instead of seeing relentless oil price growth coupled with the occasional fling in "peak oil", now predicts the biggest shift yet in the global market: the end of demand growth.

"There’s a non-zero chance that by 2030, we will see a plateauing or decline in global oil consumption,” the former hedge fund manager told at an industry event in New York which was organized by Orbital Insight and RBC Capital Markets, and quoted by Bloomberg. “It’ll happen because of technology, electric cars, renewable energy." Related: Fracking Under Fire In California

"Oil demand has grown exponentially since the end of World War II,” Hall said at the event,. "It was just a given that oil consumption would grow from here to eternity. Except we knew logically that couldn’t happen."

The long-term implications for the price of oil are obvious.

Hall's revised view is hardly original, echoing a recent warning from the International Energy Agency according to which global oil consumption will plateau in about a decade. The prospect of “peak demand” would end an expansion that dominated the past century and comes as investors and governments face pressure to move away from fossil-fuel-based economies.

The notable shift from "peak oil" to "peak demand" comes even as new oil supplies from places like Brazil, Norway and Guyana soar, while US shale production has helped US oil production hit an all time high and make the country energy independent.

It comes amid growing concerns from the oil and gas industry that it’s running up against a shift in energy consumption. That transition will increasingly limit its ability to make ends meet, with some shale firms and oil-service providers already struggling or going under, according to both Bloomberg and a recent lengthy report from Bloomberg.

Speaking later in an interview with Bloomberg, Hall said that solar and wind energy are already cheaper than coal.

“If the world fully transitions to renewable energy, what is the role of a fossil fuel company?” he said. “I think renewables is the new oil.”

Hall also quoted Sheikh Ahmad Zaki Yamani, the former Saudi Arabian oil minister who famously said that the Stone Age didn’t come to an end for lack of stones, and the Oil Age will end long before the world runs out of oil.

Global benchmark Brent crude traded at around $62 a barrel. While prices are up about 16% this year, they are still well below lofty highs above $100 from earlier this decade.

"Could we see $100 oil again? Absolutely," Hall told Bloomberg News. “That would only be temporary and hasten the ultimate demise."

By Zerohedge.com

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  • Mamdouh Salameh on November 21 2019 said:
    Legendary oil trader Andy Hall will be proven wrong about the future of oil because of four pivotal principles.

    The first is that there will be no post-oil era throughout the 21st century and probably far beyond. Oil will continue to reign supreme all through.

    The second principle is that there will be no peak oil demand either. While an increasing number of electric vehicles (EVs) on the roads coupled with government environmental legislations could decelerate the demand for oil, EVs could never replace oil in global transport throughout the 21st century and far beyond.

    The third principle is that with global oil consumption exceeding 100 million barrels a day (mbd) and growing, the notion of imminent energy transition looks like an illusion. In fact, the percentage of fossil fuels in the world’s energy mix is still lingering around 85%, a figure that has changed little in 30 years. That remains so despite being challenged by serious environmental policies and despite a global expenditure of $ 3.0 trillion on renewable energy during the last decade. This is a hefty price to pay just to gain only a percentage point of market share from coal.

    The fourth principle is that oil and natural gas will remain the core of business for the global oil and gas industry well into the future.

    And with the greatest respect to the former Saudi oil minister Sheikh Ahmad Zaki Yamani, the often quoted statement attributed to him that “the Stone Age came to an end not for lack of stone and the Oil Age will end long before we run out of oil” is not strictly accurate. The Stone Age has never ended. It is still with us to this very minute in the form of the stones we continue to use to build houses, bridges and monuments. What has ended is only an aspect of the Stone Age, namely tool-making from stone, which has been substituted for practicability by bronze and metal with the advent of metalworking, namely, smelting of Bronze and Iron. The same logic applies to oil. There could never be a post-oil era throughout the 21st century and far beyond because it is very doubtful that an alternative as versatile and practicable as oil, particularly in transport, could totally replace oil in the next 100 years and beyond. What will change is some aspects of the multi-uses of oil in electricity generation and water desalination which will eventually be mostly powered by solar energy. However, oil will continue to be used extensively in the global transport system, the petrochemical industry and other industries and outlets from pharmaceuticals to plastics, aviation and computers to agriculture which without oil will not be able to feed 7.5 billion of people around the world.

    Moreover, oil prices will be heading far beyond $100 a barrel in the a few years underpinned by continuing demand for oil and declining supplies.

    Furthermore, a fair price for oil should range from $100-$130 a barrel. Such a price will be beneficial for the global economy in that it will stimulate the three biggest chunks that make the global economy, namely global investments, the oil industry and the economies of the oil-producing countries.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • J S on November 28 2019 said:
    Dr. Salameh gives no basis for his four pivotal principles & price projections, we are expected to take them as self evident truths. I find that arrogance is a common trait amongst petroleum stakeholders, as the ability to generate great wealth overwhelms all reason. I know this because I live in Alberta where oil is king, yet the king has no clothes & will likely perish in the face of weather catastrophes for which there actually is a scientific basis & not mere speculation. The denialist baby boomers that brought this upon the earth will pass & their millennial progeny will likely ban or at least shun the combustion of hydrocarbon fuels as they get battered by worsening weather events & flooding. The old guard doesn't even see it coming.

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