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The low-cost producers in the Organization of Petroleum Exporting Countries (OPEC) will not experience the worst effects of declining oil demand caused by the accelerated adoption of electric cars, according to remarks by the chairman of Glencore on Monday.
The mining company anticipates that while low-cost OPEC members may be relatively unscathed, electric cars will become popular in mass markets earlier than projected by oil industry analysts. The jumpstart in adoption will make minerals such as copper, cobalt and others attractive quickly, while permanently crippling oil prices.
"Historically the view was that oil demand would increase beyond 2040," Glencore Chairman Tony Hayward told journalists at corporate headquarters in Zug, Reuters reports. "With the progress companies have made with electric vehicles, it's quite likely that (peak in oil demand) will come forward. It's probably not very good news for the oil industry and quite good news for the mining industry."
OPEC will meet in Vienna this week to determine the future of output cuts that have sought to reverse the supply glut plaguing markets since the end of 2014. Hayward, who previously headed British Petroleum, said the bloc’s falling production costs will ensure the nations competitiveness in the oil game even as demand peaks.
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"OPEC ultimately has the lowest cost curve in the market and there will be space for it in the market,” said.
Glencore CEO Ivan Glasenberg also bets against oil, according to his remarks at the press event. He sees demand for copper, one of the minerals markets Glencore dominates globally, doubling by 2035 if electric cars reach 90-95 percent market penetration.
In the short-term, OPEC’s oil output cuts are expected to stick around until March 2018, as suggested by Saudi Arabia and Russia last week. The cuts reduced production by 1.2 million barrels per day in the first half of 2017.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…