Look, I know I do this same column seemingly every few months, but really, isn’t anyone else tired of reading about the pending demise of the energy industry? It seems the more things change, the more they stay the same. I just had a quick look at oil prices and note that as of Thursday August 17, the price of oil was $46.98 which is exactly eleven cents more than it was at the same date one year ago. What’s up with that?

The only difference is that now we have to read daily about how the entire industry is about to sail off into the twilight never to be heard from again.

As a refresher, let’s take a look at some of the key stats for the energy industry one year ago versus where we stand today:

• OPEC production in August 2016 was over 32.5 million barrels of oil per day vs today’s level of 32.9
• US Storage was 490.5 million barrels vs 466.5 million barrels
• OECD Storage was 3.03 billion barrels vs 3.0
• US Production was 8.597 million barrels of oil a day 1 year ago vs 9.502 last week.

Since that time, we have now had almost 9 months of OPEC production cutbacks which would be much more bullish without Nigeria and Libya.

All to get back to where we were in the first place, price-wise. If I didn’t know any better, I’d have to ask myself what’s the point? Should we just throw in the towel? I feel like Phil Connors in Groundhog Day. Bing!

I mean, it’s an interesting picture isn’t it? Can anyone reasonably tell me why, given these completely contradictory set of facts, the price of the underlying commodity should be at the same level?

Everyone is trying their darndest to get prices up. Even Russia!

Seriously, everyone is playing ball! Well, except Ecuador. And Libya. Oh, and Nigeria. And Canada. Brazil. The US. OK, not everyone is playing ball, but the ones who are seem to at least be following the rule book. Sort of.

So no real impact from the OPEC cuts, runaway production in Texas, cheating… it seems on the surface that we are in a lower forever scenario right? Destined to burble along at $45 to $47 dollar into perpetuity until Tesla and Elon Musk tell us we’re done and it’s time to shut off the lights?

Well, hang on. Maybe not. Let’s not be so rash! I am seeing green shoots… Or maybe I’m deluded – you can decide.

First off, are we really that threatened by 600,000 of incremental production in the US this year when Saudi Arabia can unilaterally cut that amount by adjusting the proverbial tap? All of Canada’s incremental production is already priced in, as is Brazil’s. Venezuela is a basket case – their oil doesn’t even get sold anymore, they just hand it over to Russia and China as in-kind interest payments. The situation is so dire for Venezuela that their Citco refinery in the US is actually looking at purchasing Canadian heavy oil because they can’t get any from Venezuela. That means Venezuela is in a production crisis. Can we even trust their numbers? Sure Nigeria and Libya are production problems, but OPEC had reigned them in and they actually can’t produce that much more anyway plus their pipelines are always being bombed – the production risk collectively for OPEC is to the downside.

On the other hand, demand for oil is forecast to be up 1.8 million barrels per day this year and 1.5 mm next year. Economic growth is rising everywhere except the Middle East and Syria. Heck, even coal production is up this year (14.5% in the US, exports up 58% – sorry climate). This is all bullish, is it not? And what drives that incremental demand? Could it be… lower prices?

I know, maybe it’s all those electric vehicles that are spooking investors. After all, they are expected to collectively replace some 300,000 barrels per day of oil production in the next few years. Hmm, what is that, about 0.2% of global demand? Around here, we call that a rounding error, less than the EIA’s weekly “adjustment” to its production numbers or the “unaccounted for barrels”. So the price can’t be being held back by fears of that infinitesimal reduction in demand.

Maybe it’s the fear of peak oil demand which when it comes will send the price of oil to zero! That makes more sense. The price of anything that trades by the nanosecond is surely determined by something that may or may not happen in the next few decades (at least according to credible analysts) when most of the investing public will be retired or have moved on to clipping coupons on their AmazApple shares (yes, I am predicting a merger between Amazon and Apple).

I don’t know about the rest of you, but I just don’t see it. The world consumes close to 100 million barrels of oil A DAY! That is a staggering amount. That’s enough oil to fill close to 6,400 Olympic sized swimming pools or 100 million bathtubs or fill 130 million SUV gas tanks.

Yet you read some of these analyses and we are told that demand for oil is about to fall off a cliff. Or that an EV industry that last year sold only 750,000  vehicles is somehow in the very near future going to swamp the 1.1 billion internal combustion engine market because “technology”?

That is not only preposterous, it’s dangerous. It’s driving poor investment decisions and masking the very real energy issues that we face today. It leads blinkered politicians to make disastrous policy choices about things like critical energy infrastructure as memes and fads become more important than actual thought and science and planning.

Here’s a thought – when battery technology isn’t even settled yet, can we calm down on the last rites for the fossil fuel industry? Or when 1600 new coal plants are under construction around the world representing a 45% increase in coal powered electrical generation (3 x the current installed renewable base), can we at least acknowledge a place for cleaner burning natural gas and LNG to act as a transition? This isn’t picking VHS over Beta, then DVDs and Netflix. This is changing a way of life, for the world. It doesn’t happen overnight.

When someone tells me that a pipeline won’t be needed in 40 years so it shouldn’t be built, I have to shake my head and ask why aren’t we building it right away then, since we’re going to need the damn thing for 40 years!

Put simply, a full transition away from fossil fuels – IF IT EVER HAPPENS – is going to take decades (plural). Don’t let politicians who can’t think past the current election cycle or 140 characters in a retweet or a nice Instagram picture of a windmill tell you otherwise.

Here’s what I know. I’m 52 years old and expect/hope to live for another 30 years at least. The demand for oil is expected to keep growing at about 1%-2% per year for at least the next decade. That means that in 2030, demand will be about 110 mm barrels of oil per day. Assuming a decline rate of 5% a year that means that 5 mm barrels a day of new production is going to need to be added each year to just tread water, never mind the extra 1 million per day to feed increased demand. That is the equivalent of adding twice the amount of production that comes from Canada’s oilsands or three Permian Basins every year. Fossil fuels are here for the long haul.

So really, at the end of the day, I don’t particularly care that 25 new wells are completed a week in the US adding 25,000 new barrels of production because you know what? We’re going to need them. Every last one of them and more.

That also tells me that since the energy industry is here to stay, at the very least til then end of my working life, I’d be well advised to load up on some energy stocks, whose values have been the only thing that seem to have moved since last year, being down some 15% on average since August of 2016. All of this notwithstanding that commodity prices are at the same level.

Hold it, wasn’t this supposed to be about déjà vu all over again? Of course it is. You’ve all heard the energy rant before. But I’ll keep doing it until the reaction is different or something changes. It worked in that gopher movie after all. Bing!

Prices as at August 18, 2017 (August 11, 2017)

• The price of oil fell during the week despite solid US inventory draws but rallied after Steve Bannon was ousted from the White House.
  • Storage posted a large decrease
  • Production was up
  • The rig count in the US appears to have plateaued
• Natural gas fell during the week as we sit in summer doldrums. Injections continue to feel small this year, especially with the incremental rig count.
• WTI Crude: $48.63 ($48.78)
• Nymex Gas: $2.900 ($2.983)
• US/Canadian Dollar: $0.7954 ($ 0.8050)

Highlights

• As at August  11, 2017, US crude oil supplies were at 466.5 million barrels, a decrease of 8.9 million barrels from the previous week and 24.0 million barrels below last year.
  • The number of days oil supply in storage was 26.7 behind last year’s 31.2.
  • Production was up for the week by 79,000 barrels a day at 9.502 million barrels per day. Production last year at the same time was 8.597 million barrels per day. The change in production this week came from a big increase in Alaska deliveries and higher Lower 48 production.
  • Imports rose from 7.762 million barrels a day to 8.126 compared to 8.193 million barrels per day last year.
  • Refinery inputs were down slightly during the week but still strong at 17.565 million barrels a day
• As at August 11, 2017, US natural gas in storage was 3.082 billion cubic feet (Bcf), which is 2% above the 5-year average and about 8% less than last year’s level, following an implied net injection of 53 Bcf during the report week.
  • Overall U.S. natural gas consumption was flat during the week – with increases in power and industrial demand offsetting declines in retail and commercial demand
  • Production for the week was flat and imports from Canada were down 7% compared to the week before. Exports to Mexico were down 2%.
  • LNG exports totalled 11.4 Bcf.
• As of August 15 the Canadian rig count was 197 (31% utilization), 132 Alberta (31%), 26 BC (37%), 34 Saskatchewan (30%), 5 Manitoba (33%)). Utilization for the same period last year was just above 15%.
• US Onshore Oil rig count at August 18 was at 763, down 5 from the week prior.
  • Peak rig count was October 10, 2014 at 1,609
• Natural gas rigs drilling in the United States was up 1 at 182.
  • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
• Offshore rig count was down 1 at 17
  • Offshore rig count at January 1, 2015 was 55

• US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 56%/44%

Drillbits

• Wildfires continue to rage in British Columbia. Please consider a Red Cross donation if you can. It’s simple, easy and it helps
• The renegotiation of NAFTA got underway in Washington. At this stage, it looks like a number of Canadian favourites are in the cross-hairs including supply management and SUPER EXPENSIVE DUTY on internet purchases. Among other things. Energy appears to be getting a free pass. Phew.
• Trump Watch: Where to even start? Charlottesville, disbanding of advisory committees, unhinged tweets, Bannon out… Hard to see how the Don tops this one since nuclear war with North Korea is so last week.