The jury's still out on
peak oil, but the concept of peak
gasolinehas some very credible proponents.
Last Thursday,
ExxonMobil (NYSE: XOM) CEO Rex Tillerson
argued that U.S. gasoline consumption peaked in 2007. In his
words, "motor vehicle gasoline demand is down, is headed
down, and is going to continue to head down."
This isn't a new position for the prominent oil patch
poo-bah. Back in April,
The
Wall Street Journalcited Exxon's belief that U.S.
light duty gasoline demand will drop by 22% by 2030.
Tillerson isn't alone in the peak-gasoline camp, either.
The government's own estimates are that gasoline consumption
peaked in 2007, at 371.2 million gallons per day. Cambridge
Energy Research Associates has concluded that 2007 was
probably the peak, barring a collapse in the oil price.
The main drivers (ahem) of this trend are the dovetailing
desires for reduced oil dependence, lower emissions, and
better fuel efficiency. The high oil prices of 2008 -- and
even today's prices, which are quite high by historical
standards -- have been a major force for a shift in consumer
preferences toward more compact and efficient vehicles,
including hybrids. Lithium ion battery whiz
A123 (Nasdaq: AONE) certainly has high oil
prices -- and
government greenbacks-- to thank for its recent
warm receptionon Wall Street.
A parallel development is the army of venture
capital-backed science projects seeking all manner of
petroleum alternatives to
stick in your fuel tank. Renewable fuel standards --
optimistic given current funding levels --hold out the
promise of a robust end market for these products.
ExxonMobil made headlines with its
algae investment, following in the
footstepsof
Chevron (NYSE: CVX),
BP (NYSE: BP), and
Royal Dutch Shell .
Valero (NYSE: VLO) has also been active in
the area of fuel alternatives, funding the development of
feedstocks as diverse as algae, municipal solid waste, and
animal fats.
Refiners have also been increasingly moving into
conventional ethanol production. Valero
took the plungewith its purchase of all those VeraSun
plants back in March. Just last week,
Murphy Oil (NYSE: MUR) picked up an ethanol
plant of its own.
The motivations behind all of these corporate actions
become clearer when you consider the peak gasoline point of
view. With even ExxonMobil, a diehard hydrocarbon company,
moving into alternatives, you know the outlook for refined
petroleum is dimming. That could make the case for avoiding
the independent refining group. Then again, if there's an
ongoing flight from the space, those like
Holly (NYSE: HOC), who stick around to
pick up the pieces, should be able to rack up some decent
returns.
This article was originally published as
Peak Gasoline Is Hereon
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