Is the oil glut here to stay?

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Aditya Soni, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur


If you thought the oil glut was a temporary phenomenon and the price of oil was certain to rise in the future, think again. According to a recent Bloomberg study, the price of oil may never rise again to its previous levels. And what’s causing this ceiling of oil prices? It’s the electric car.
According to Bloomberg, by 2040, 35% of the cars worldwide will run on battery and they will cost less than $22,000. That will be the start of mass market liftoff of electric cars. The market for electric cars grew at about 60% last year. Assuming the same growth rate, by 2023, electric cars would displace oil demand of nearly 2 million barrels per day. The same amount of glut that triggered the 2014 oil crisis. Although this prediction seems very aggressive, according to a more methodological approach by BNEF, we would reach the same figure by a few years later- 2028. At-least one thing is certain- we may not require as much oil as we do now.
Another side of the coin is that where will all this electricity come from? Will the emerging economies in 2040 be able to sustain their growth without oil? Data shows that there may be good news in the offing. Since 2013, the world has been adding more renewable sources of energy than coal, natural gas and oil combined.
Is the oil glut here to stay or not is very hard to predict, but if we go by the historical data, things do not bode well for the oil producers.


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