Goldman Sachs Warns of 1.9m Barrel Per Day Oil Glut by 2026

This is somewhat of a clickbait headline. It always bothers me when market analysts are quoted with such definitive statements like "oil will next year fall to between $53 and $56 per barrel." There are so many dynamics to commodity markets - not just supply and demand, but also how market participants will react to an imbalance (for example, will shale producers cut production if oil prices fall).

Prediction #1: Miraculously, somehow the marginal cost of fuel at the pump will not fall as fast as raw input barrel costs suggest. Brisbane (Australia) has a 40c price swing from 170c to 210c per litre RON 90/91 with a marginal break for 10% ethanol and I would suggest this change in volume will not push the floor much below 140c, and the ceiling will not drop below 200c.

Prediction #2: perfectly normal laying-up of ships, ULCC in particular will be painted as a Munch-Scream crisis, despite happening every fuel-price cycle worldwide. This is how the industry copes: it sacks the maritime workers, it closes the refineries, it pushes back on the economies who single-income from oil, and it keeps the profit high inside the mainstream corporate ring fence.

Prediction #3: Much will be made of shifts in EV purchase with people also screaming "told you so" but the pace of EV adoption is not primarily driven by petrol prices. They're part of the story, sure. The cost of EV production is not strongly coupled to EV price in the market, and both have been declining for a decade. At some point, buying an ICE car will represent the less rational choice on e.g. maintenance cost alone. Likewise the pace of battery deployment into power networks and home. V2G alone would justify an EV for many people, its 4x or more the normal home battery size and is a good fit for people who don't barrel out of bed and demand to drive 400km immediately, but who do want to stop paying for electricity supply.

There is no "last barrel of oil" there is only a long, drawn out tail of demand for the next 30-50 years or more. Oil/Gas feedstock for pharma, plastics and fertilizer is a continuing need.