The decline of oil · Invest & Retire Community

The decline of oil

Just came across this article of on Bloomberg: Saudis Pledge Million-Barrel Cut at OPEC+ Meet

https://www.bloomberg.com/news/articles/2023-06-04/latest-oil-market-news-and-analysis-for-june-5?srnd=premium-canada

Bloomberg mentioned oil price is increasing but once you look at the US OIL chart - the oil price is steady at $72 dollars over the weekend.

In fact, it is actually decreasing.

This brings us to a major macro change in the next 10-30 years.

It is plain obvious now but it is important to mention it.

Oil is about to decline. Saudi can try to cut output but...

With the rise of EV, the rise of renewable infrastructure, the transition away from fossil fuel, humanity hopefully can transition out of oil before we run out of time.

This means that even if Saudi tries to cut oil, it can only stabilize the price but cannot make it higher

If Saudi cuts too much output, it will hurt its financials and its stock price (Aramco)

This means the Saudi needs to balance between:

1. Cutting output to maintain oil price

2. Maximizing revenue (sale of oil) as much as possible

But I think the renewable energy movement have progressed far enough to trigger a decline in oil demand in the next 10-30 years.

One more thing - Bloomberg mentioned prices go up or down (e.g. Oil) - you always need to check the chart yourself as it is not true (or not as updated as it should be)

Cheers,

Eric Seto, CPA, CIM

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