| Regarding bunker oil, there are ships under construction that will use hydrogen instead of bunker oil. Also interesting is that while large ships burn bunker oil, they do so to power a generator that powers an electrical engine. This is true for modern oil tankers and large container ships. So, it's not that inevitable that ships will continue to use bunker oil forever. Also, there is a company in the US already selling synthetic fuels to airline companies. I think there was a plane that recently flew with one engine burning that stuff. And finally, battery electric trucks of basically all sizes are now being produced and are shipping in small volumes. Diesel demand is on a slow decline. There is of course some debate on whether hydrogen will play a role in that. IMHO, the early signs are that it is basically not going to be a big role for at least trucking. It works, but has bout 4x the energy cost. Which is not a great value proposition when batteries basically get the job done already. The challenge with oil is not so much the price but the fact that it keeps changing wildly unpredictably and that these swings seem to be getting more common. Those wilds swings are very damaging to industries that depend on those prices either being high (like shale oil) or low (any company that buys oil or gas in large quantities). Prices can be abnormally high or low for months/years on end if e.g. the Saudis or the Russians decide to flood the market with oil or decide to limit supply when that suits them. The US is only energy independent when prices are very high. And as you note, even then it needs to import oil because not all oil is alike. High prices are very damaging to economies since you get things like inflation getting out of control when people suddenly have to pay a premium to heat their houses, drive their cars, or have stuff trucked around. I'm including natural gas here as it seems the prices for both oil and gas seem to be suffering from this. And of course it is an important thing that shale oil drilling produces in large quantities as well. And we are seeing quite a bit of inflation lately because of the high prices. These price swings will drive demand destruction over time and far more rapidly than some people in the industry seem to hope/think. People will want to isolate themselves from supply and pricing issues. That's already happening. People put solar and batteries in their home because they can and to shield themselves from extortion level pricing and blackouts. The higher the prices, the more you will see people try to work around that. The transport section will largely not be dependent on oil or gas by mid this century. Road traffic probably by the end of next decade. With about half new cars being electric by the end of this decade. That's just extrapolating from growth plans of various manufacturers. At this pace, they'll hit 50% of the market in about 8-10 years. A 50% drop in demand is going to be tough if you have investments in companies that 1) rely on high oil prices and 2) depend on things like gasoline and diesel sales to continue to be a thing that economies spend a lot of money on. Most investors are already voting with their feet because they know this is happening. |
Isn't that the point of futures contracts - to smooth variable prices?