Gold Through the Ages... Civilization’s Love Affair with the Yellow Metal
The debate about Peak Oil Demand (POD) will likely rage on for quite some time. Years ago, Peak Oil theories on production and supply were constantly thrown around for general consumption. There was even an Association for the Study of Peak Oil. It seemed to culminate with the release of “Syriana” in 2005 staring George Clooney and Matt Damon. A few years later, the U.S. Shale Revolution began and economic potential of other large unconventional assets like Alberta’s oil sands entered public view. Many Peak Oil supply and production theories were put to rest, because oil is much more abundant and economically accessible than originally thought.
The fiasco of Peak Oil theories showed the need to point a critical eye to underlying assumptions of crafted narratives about future energy markets. It would be a mistake to do the same with POD. There are serious questions about the nature of POD and the supposed “transition” away from Greenhouse Gas (GHG) intensive fuels that need to be explored. So please ponder the following questions…
Can copper producers effectively supply electrification of the transportation sector in the coming decades?
Rio Tinto, EMR Capital, and BMO Capital Markets have all expressed concern about copper supply in the coming decades. Earlier this year, CRU Analyst Hamish Sampson provided a stark supply outlook stating that “only if every single copper project currently in development or being studied for feasibility is brought online before then, including most discoveries that have not yet reached the evaluation stage, the market could meet projected demand.” The forecast suggests that copper production could plummet from current levels of roughly 24 million metric tons per year to just 12 million in 2034. Two hundred copper mines are expected to reach their productive end-of-life by 2035.
Even though copper is highly recyclable, new production is required due to an increasing global population and the fact it is trapped in end uses like piping and wiring for decades. What does this have to do with POD? Potentially, lots. For example, if the appropriate charging infrastructure cannot be built, demand for plug-in electric vehicles (EVs) could be stunted for years. Afterall, if individual consumers and businesses cannot have a predictable, easily accessible way to power their vehicles at a cost-competitive price, why would they purchase a plug-in EV? In addition, EVs require significantly more copper: a conventional vehicles contains up to 23 kilograms, whereas plug-in hybrids and plug-in only EVs require up to 40 and 60 kilograms, respectively.
Perhaps this is why Shinzuo Abe, Toyota’s Powertrain General Manager, is skeptical of plug-in EVs making a major breakthrough before 2030. Without the proper charging infrastructure in place, the market cannot adopt them unless direct solar powered EVs like the Sion make a significant splash in the market. However, it remains to be seen whether solar powered vehicles can be made practical enough to be globally viable.
Then there is also the fact that in mining, discovery to production lead times have increased substantially in last two decades. Between 1985 and 1990, leads times hovered around 5 years. Between 2010 and 2015, lead times were not less that 15 years. Less ideal geology is considered one major factor, as the easy-to-get-to, highly quality deposits are becoming scarcer. Of course, if vehicles like the Sion become viable enough it could offset of the demand for charging infrastructure. We shall wait and see.
If not used for refined fuels, how much oil will be pushed into other markets?
Supply chains connect industries. However, resource inputs to supply chains often compete with each other. Supply chains evolve, in part, as demands of end users change. In 1960, for example, vehicles contained a lot more metals than they currently do. Auto manufacturers have gradually increased the proportion of plastics to metals. Cost, fuel efficiency and customer preferences have made it practical for auto manufactures to do so. That trend appears to continue as 3D printed cars, like the LSEV, enter mass production in the coming years.
If oil isn’t being refined into fuels, it may open the door for uses in other parts of the market that are inefficient and expensive. Afterall, could there not be opportunities from a potential abundance of cheap oil-based petrochemical feedstock? Possibly. Could it give manufacturers and builders a reason to ponder their supply chain inputs, and to rejig to cheaper and/or more effective naphtha-based inputs? Possibly.
A simple internet search will generate pages of 3D printing applications including replacement dog skulls, guns, homes, furniture, door handles, shoes, and faucets. Uptake of “additive manufacturing” is underway and implications for individual consumers and manufacturers could be substantial. Although materials that comprise 3D printed objects are highly varied, oil and natural gas-based inputs are significant. Oil producers would be more than happy to see their products enter new supply chains via petrochemicals and through 3D printing. If it’s not being used as a fuel, it could go elsewhere. After all, the global population is increasing. So too are the resource needs of emerging economies. Petrochemicals will play a major part in resourcing these needs.
Like Peak Oil production and supply theories, it is very important to challenge carefully crafted narratives about POD by asking the right questions and finding evidence to answer these questions. Will there be enough copper? How much can fuel efficiencyimprove in the coming decades? Where else can oil go? There are others. Lots of them. The world may only be a few years away from getting more substantive answers about POD. Perhaps it’s a good time to make a movie about it?
By Justin Ziebart from Oilprice.com
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