Peak Oil is You
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Page added on June 9, 2016
Peak oil is so yesterday; now it’s all about peak auto
Remember peak oil theory? It was all the rage just a few years ago.
Serious books were devoted to the idea that the world was running out of crude. Deep thinkers pontificated about its potentially dire impact on human civilization.
But then all that peak oil talk peaked. Thanks to the fracking revolution, it became clear that the world actually has plenty of oil. Supplies can now be turned on or off almost at will, as prices rise and fall.
Turns out the future is a lot harder to predict than the peakists thought. But once a peakist, always a peakist. It seems to be a tough habit to break.
Now they’re busy predicting other peaks. Such as: the planet’s peak carrying capacity; peak sustainable population levels; peak food production; peak allowable carbon emissions levels; peak stock market levels; and of course, peak auto.
Yep, peak auto. It’s a major focus right now in the car business, where a growing number of analysts fret that North American auto sales have already hit a ceiling, and are destined to flatline or even head south.
There is some sense to this, of course. As the old stock market adage goes, trees don’t grow to the sky. And so it is with auto sales, which have set annual records for several years running and may be poised to run out of gas, as interest rates rise and the economic recovery matures.
The fear of softer sales ahead is reflected in the sluggish stock prices of major auto manufacturers such as General Motors and Ford, and the weak performance of key Canadian auto parts suppliers such as Magna International and Linamar, which topped out a year ago.
Despite a big stock market rally since February, Magna’s share price remains nearly 30 per cent below its 52-week high, while Linamar is down almost 40 per cent. Both stocks trade at rock-bottom price-earnings multiples of less than 10 times.
It’s a similar story with GM. After posting record annual profits last year and stronger first-quarter earnings, GM’s shares have backtracked this year, sliding about 13 per cent. Since December 2013, the shares are down about 28 per cent.
GM’s languishing stock even prompted company CEO Mary Barra to complain publicly Tuesday at the company’s annual meeting in Detroit.
“I absolutely think, and we think, we’re undervalued right now,” she said. “We’re going to continue to work to keep making sure people understand exactly the mission of General Motors and what we’re working toward. I believe that as we continue to do that, that’s something that will take care of itself.”
Well, maybe. And maybe not. For now, it’s all about the fear of peak auto, says David Whiston, an analyst with Morningstar in Chicago.
“This is the biggest issue for investors,” he told Bloomberg. “A lot of people think it’s peak auto and there’s no reason to own auto stocks right now.”
Besides growing angst over the prospect of weaker sales, the industry is rattled by fears of potentially disruptive technological change, from self-driving cars to ride-sharing services that could curb demand for new vehicles.
LMC Automotive, a U.S.-based industry consulting firm, recently cut its 2016 U.S. vehicle sales forecast by 100,000 units to 17.7 million. Although that’s still above last year’s record of just under 17.5 million units, the pace of growth is slowing, it noted.
“Vehicle sales growth appears to be flattening out,” Jeff Schuster, LMC’s chief forecaster, told Automotive News, a leading industry trade publication.
“While this is driven by an array of variables, including slow economic growth and stock market volatility, a pattern is emerging sooner than anticipated. While we do not anticipate a retraction in volume over the next 12-18 months, strong year-over-year growth will be difficult to come by.”
Not everyone buys the peak auto theory, however. Carlos Gomes, senior economist and auto industry analyst at Scotiabank, says the current auto sales cycle will run stronger and longer than the naysayers predict.
He expects Canadian car and light truck sales to reach 1.9 million units this year, a hair above last year’s record tally, while U.S. sales reach a record 17.7 million units.
“U.S. households are in much better financial shape than they have been in quite a while. At the same time the average age of the U.S. vehicle fleet is at record highs, so that tells you that there is still significant replacement demand ahead,” he says.
“Most other analysts I guess are looking at the fact that we’ve had an extended cycle and the fact that credit has been fairly easy, so the fear is that as rates potentially go up, that could tighten and cause auto sales to soften. That’s the debate that’s going on.”
As for me, I side with Gomes. Any rise in U.S. interest rates is likely to be gradual and protracted. Meanwhile, the U.S. labour market, despite last month’s weak jobs report, has tightened considerably over the past year or two, while U.S. house prices have steadily climbed.
The wealth effect from higher house prices and the probability of higher wage gains ahead should provide enough fuel to keep auto sales humming for at least another couple of years, and maybe longer.
18 Comments on "Peak oil is so yesterday; now it’s all about peak auto"
gwb on Thu, 9th Jun 2016 11:55 am
More msm blarney coming from the capital city of the Canadian province that brought us the tar sands. Maybe this fella has been breathing too much smoke from the Fort McMurray wildfire
HARM on Thu, 9th Jun 2016 2:06 pm
Blarney, yes. But blarney that the vast majority of the public and world leaders now believe.
Peak Oil = discredited doomer theory/fad from mid-2000s
Overshoot/limits to growth = discredited tree-hugger doomer theory from 1970s
overwhelmingly dominant theology of 2016 = BAU/cargo cult Prosperity Gospel, Cornucopian infinite growtherism and free market fundamentalism (aka predatory capitalism)
rockman on Thu, 9th Jun 2016 4:45 pm
So easy to present crap like thus when you present the actual data:
http://www.tradingeconomics.com/united-states/total-vehicle-sales
Since 2009 the US auto count has seen a robust increasing trend. Occasional dips as we see today but nothing even close to indicating a plateau let alone a peak. Which I find a bit surprising: the high gasoline period shows no meaningful decline. Even more interesting IMO is that a sluggish economy didn’t seem to have a negative impact.
And that’s just sales. The total fleet count according to Wiki: The United States is home to the second largest passenger vehicle market of any country in the world second now to China.[1] Overall, there were an estimated 255.8 million registered passenger vehicles in the United States in 2013. This number, along with the average age of vehicles, has increased steadily since 1960, indicating a growing number of vehicles per capita.
BTW this is the first I’ve seen anyone other then these fools refertrefert to PA.
Harquebus on Thu, 9th Jun 2016 8:46 pm
Peak oil is not a theory, it is an observation.
Those that deny peak oil do not understand it.
We have been living the peak oil life for a decade now with the effects being hidden by the biggest debt bubble in history. When, not if, the bubble pops, peak oil will be revealed and the fractured economy it created will not be able to handle the consequences.
Outcast_Searcher on Thu, 9th Jun 2016 10:07 pm
Harquebus – if oil peaked a decade ago, why do we have more demand than ever globally, and more consumption than ever globally.
I agree that peak oil is a reality and that it must peak some day — but all the evidence currently is that it hasn’t peaked yet, and in fact, we now have a big glut from US fracking, causing low prices.
The debt bubble doesn’t magically make more oil continually appear — improved technology and continued demand growth have done that.
Kenz300 on Fri, 10th Jun 2016 4:30 am
Electric cars, bicycles and mass transit are the future…..fossil fuel ICE cars are the past…………..
Think teen agers vs your grand father…………………. cell phones vs land lines…….
NO EMISSIONS……..climate change is real………
Save money……no stopping at gas stations…..no oil changes……..less overall maintenance……
New Documents Show Oil Industry Even More Evil Than We Thought
http://www.huffingtonpost.com/entry/oil-cover-up-climate_us_570e98bbe4b0ffa5937df6ce
Climate Change is real….. we will all be impacted by it.
Oil Giants Spend $115 Million A Year To Oppose Climate Policy
http://www.huffingtonpost.com/entry/oil-companies-climate-policy_us_570bb841e4b0142232496d97
The Kochs Are Plotting A Multimillion-Dollar Assault On Electric Vehicles
http://www.huffingtonpost.com/entry/koch-electric-vehicles_us_56c4d63ce4b0b40245c8cbf6
Inside the Koch Brothers’ Toxic Empire | Rolling Stone
http://www.rollingstone.com/politics/news/inside-the-koch-brothers-toxic-empire-20140924?page=2
Dustin Hoffman on Fri, 10th Jun 2016 8:24 am
The real future of human transport
You are walking on them
oracle on Fri, 10th Jun 2016 8:34 am
Outcast, Demand and consumption might be growing, but not strongly. There is a chronic surplus. It has taken a fire in Canada, sabotage in Nigeria, economic and social meltdown in Venezuela, failures of US tight oil companies, among other things, to bring supply down to be more in line with demand. And there’s still too much supply (but just wait until the consequences of recent capex cuts kick in!).
BTW peak oil and peak oil demand are two entirely different things. By coincidence (or not) production and demand are pretty flat these days.
And what evidence is there that oil has not peaked? Certainly it appears the world is awash with oil. However, this is an illusion. Do you think that tight and tar sands oil are the same as conventional crude oil? They’re not, yet all these oil types (and other types) are lumped together to create the impression that “oil” is plentiful. That’s like saying your garden is producing more this year than last year because you include weeds in this year’s total of garden output. If you dig into the data, you’ll find that the cheap conventional crude is increasingly scarce, i.e., it has peaked — ask the Alaskan and the Brent Sea producers.
Meanwhile, debt enabled the production of more expensive and less versatile light tight oil. This debt was a foolish investment, much like sub-prime mortgages and their derivatives. Light tight oil wells deplete very quickly and most will never pay back the debt loaned to drill them. Meanwhile light tight oil is not a substitute for cheap conventional crude. (The bankers apparently overlooked these details.) But since this debt has been irretrievably sunk into the wells, there’s really no choice but to pump! pump! pump! This unconventional oil is lumped with the conventional oil like apples with oranges, and thus it appears production increased.
It’s all an illusion. The debt bubble did indeed (and not so magically) make more oil appear. As with all such foolish investment, there is an eventual reckoning.
oracle on Fri, 10th Jun 2016 8:50 am
“The wealth effect from higher house prices and the probability of higher wage gains ahead should provide enough fuel to keep auto sales humming for at least another couple of years, and maybe longer.”
This is funny.
“higher house prices and the probability of higher wage gains” hahahahaha What planet is the author from?
Also
“wealth effect” = “car loan to anyone who can fog a mirror”
“The wealth effect … [should] keep auto sales humming for at least another couple of years”, at which time, by definition, car sales peak.
The author of this propaganda is either clueless or trying (but failing) to be intentionally deceptive.
JuanP on Fri, 10th Jun 2016 8:53 am
Dustin, Great observation! Our feet and our capacity to walk on and pedal with them will become increasingly important in the future. I recommend walking and biking on a regular basis carrying a backpack or bags for training purposes. A hiking or biking trip is an excellent prepper’s vacation!
Newfie on Fri, 10th Jun 2016 4:28 pm
Judging by this article, stupidity has not peaked yet.
jedrider on Fri, 10th Jun 2016 7:14 pm
Peak PAPER wealth. Perhaps.
makati1 on Fri, 10th Jun 2016 7:16 pm
jedrider, or even ones and zeros in some electronic system that can vanish at the touch of a key.
onlooker on Fri, 10th Jun 2016 7:32 pm
Money has always been an illusion created by ruling elites to bribe subservience and too maintain their power relative to the masses. Ultimately, if the masses did not acknowledge money its influence would wane and disappear.
rockman on Fri, 10th Jun 2016 7:51 pm
Outcast – And exactly why I keep harping on the point that date of global PO has little relevance on our lives. We may be at GPO today with a $50/price. Or might happen in some future year when the price averages $100/bbl. Or just as likely $35/bbl. That magical future year might see a shere global recession…or seeing great GDP growth in many countries.
US PO happened in the 70’s and over following decades we had high/low oil prices, stronge GPD growth/recessions, booming/busting stock market, peace/war in oil exporting ME countries, etc.
In reality the amount of oil produced doesn’t so much control global financial health as that health controls the amount of oil produced. Even the seemingly contradictory seems valid: a weakening global economy could no longer sustain high prices which lead to low oil prices which pushed exports to bring more existing production into the market place then resulted from record high oil prices.
No matter how often some folks try to restrict the dynamics to an individual component (such as a date, an oil price, a production rate, etc.) it doesn’t change the future we’re facing.
JV153 on Sat, 11th Jun 2016 6:30 am
Seems to me p.o is in the rear view now.. how long can the big three – the US, Russia and KSA continue pumping at record levels, with the US waning now ? Car sales continue to increase, as Rockman states.
makati1 on Sat, 11th Jun 2016 10:23 pm
Car sales in the Us are supported by Zero interest and 7+ years to finance by anyone who can walk into a showroom. That huge bubble will burst along with all of the other bubbles in the not too distant future. Are you prepared?
Davy on Sun, 12th Jun 2016 5:42 am
As usual Makati Bill speaks about an economic matter like it matters LOL. Makati Bill, yes the auto industry is going to implode and this is a global implosion. The reasons are not long term financing. Furthermore the implosion will not be from subprime loans. These are just symptoms of something greater and that is debt and debt deflation of the entire global economy. It is a wide range of issues not something specific.
Longer term financing is legit. I have a Jetta TDI that I purchased back in 2010. It gets 40+ MPG hwy. It is my commuting car. It has 80,000 miles on it. I have never had to fix one thing. I am going to keep it for many more years depending on the VW emission scandal. 7 year financing fits new cars like I have. The zero percent interest is just a gimmick that people like you buy into like it matters. Back when I used to finance things in my corporate days 13 years ago you had interest buy downs or zero interest or you could take the financing and lower the purchase price. With cars they just lower the purchase price and quote 0% interest. Most sheeples buy into this sales gimmick like you Makati Bill.