The last oil price peak?

This is my own prediction; the future of oil price will reach again a peak price* around 2020, but after that it will never again.

Why will that happen?


Image from Dominik Gwarek on freeimages


The following trends will shape the transition away from the oil-dependant economy and the effects will have to be fully present short after 2020 (as I posted before, we are crossing the chasm):

  1. The global climate policy. Following the Paris agreement, it is not an option not to change, reduce emisions and therefore cut down oil consumption. In order to avoid worse effects of climate change the change is needed, very soon. A good sign is we have already seen 2 consecutive years of decoupling, economic growth without increase in emmissions (and that has happened without bold international action). The suggested carbon tax would be the strongest of levers.
  2. The renewable dominance of electric power. The transition is already visible. No other power source can be installed as fast and with similar scalability, prices also start to make it almost a no-brainer (an example?: the latest PPA in Morocco for wind). And in fact no other power source is being installed as much, so we will have superavits of renewable.
  3. The electrification of transport. Maybe one of the most necessary steps in the transition and that is taking already too long to trigger. An indispensable step to decarbonize the economy, that should be mandatory. However, it will only take place when the simple economy for the majority makes it a no-brainer. This is, when electric mobility (or other alternatives) is clearly less expensive than owning an internal combustion vehicle for the average person. There was a recent article in Bloomberg on the subject.

Not only do I predict it, but I also have bet on the next peak by investing in an oil price ETF (I bought at 10,69$, so it wasn’t the lowest, it has been even -20%). Still, with the new peak it should be at least possible to triple the investment. I promise to write on the result of this (hopefully good) bet in the blog!

(*In constant currency, it is understood.)

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