We had intended to followup last weeks’ ROCE Deep Dive post (here) with examples of how to apply it to macro forecasting as well as subsector and company analysis. However, a surprise LNG permit “pause” from the Biden Administration followed a few days later by Saudi’s announcement it would “pause” its planned oil capacity expansion has led to a change in publishing plans!

We wrote a sevenpart tweet/post on TwitterX over the weekend (here) that has now garnered a mindboggling 120,000 views, well above our typical 1,0004,000 views per tweet/post. Key points: (1) there is no such thing as an “Industry” view on the “pause,” it essentially depends on whether a company, industry, or country is long or short natural gas; (2) the potential impact on Europe has been both overanalyzed and overstated; (3) the implications for developing Asia have been underappreciated; (4) competitor countries are undoubtedly rejoicing over the news; (5) big versus small government is a basic viewpoint difference in how to address energy & environmental policy; (6) climate implications are more complex than the simple debate of LNG is highercarbon than renewables versus lower carbon than coal.

We address the Saudi capacity expansion pause from the perspective of the recent Saudi oil policy that has focused primarily on the frontend of the curve. Is this a shift to focusing on longdated oil? As a reminder, both the Biden LNG permit and Saudi capacity expansion pauses are consistent with our “Super Vol” rather than “supercycle” commodity macro framework. Policy rhetoric and actions, frankly, can be as meaningful as underlying supply/demand, especially over the neartomedium term.

Finally, we observe signs that we are past “peak Tesla,” especially when considered alongside clear evidence of electric vehicle (EV)orbust fatigue among car buyers and many traditional auto manufactures. China’s EV ramp continues, more or less unabated, and we believe is highly motivated by a desire to limit growth in oil imports. We do not believe there is a singular EV adoption “Scurve” for all regions. China will be different than the USA, which will be different than India, the rest of Southeast Asia, the Middle East, Africa, and Latin America. We continue to believe there is not a decade, let alone year, when we KNOW oil demand will peak, even as we expect continued growth in many new energy technologies including EVs.

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Twitter: @ArjunNMurti

DISCLAIMER
My views are my own and not attributable to any current or past affiliation.

CREDITS
Intro & Outro music: Wolf Hoffman on Apple Music: Concerto for 2 Cellos in G Minor, Rv 531: I. Allegro Moderato.

This episode of SuperSpiked Videopods was edited and produced by Veriten Productions.