Weekend Musings: Our dependence on oil

Oil majors seek survival in transition to low-carbon world

Recently, FT published an article that covered the challenges in the oil industry and the outlook on shifting into a low carbon world.  The article basically says that the oil industry will face challenges due to shifts in motor gasoline demand, towards employing greener technology and eletricfication of passenger cars.

In the United States, about half of their annual consumption of oil is in motor gasoline (the stuff that goes into your car) otherwise known as petrol (Source: EIA).

So let’s assume that this split is applied across all nation’s. USA and China combined accounts for 33% of world oil consumption, half of which goes to mogas. BP forecasts the global car population to double by 2035 mainly driven by developing countries, while the EV population will take up about 6% of the total car market.

That still means we are heavily reliant on oil in 2035, despite eletricfication. There are a whole plethora of other industries that rely on oil, such as the diesel industry, plastics, waxes, chemicals, etc. Our lives are too entrenched in oil based products to change. You’d be surprised how many of our daily products come from petroleum.

Having said that, I am not inclined to take exposure in crude oil via ETFs or futures. Usually it’s gamed by OPEC and hedge funds (seen it happen multiple times since 2007). I’d rather take an exposure on specific parts of the petroleum industry; in a chemical company or a lubricants manufacturer or even a utility gas company, where the cycle is defined and linked to an indicator like gdp or cpi. So I’m definitely staying clear of the Saudi aramco IPO and any oil company who seeks to raise funds *alarm bells going off*.

I prefer to take exposure in natural gas utility companies, likely a dividend play here.

Chubu electric power company (Japan), Ausnet services (Australia, Singapore).

Any other companies to suggest?

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