Is the global economy going through interesting times? Is almost every category and sector playing by a new rule book? Obviously!

Royal Dutch Shell was formed in 1907 when Royal Dutch Petroleum amalgamated with Shell Transport and Trading, effectively merging three profit centers – lifting, refining and “marketing” oil products. Today, Shell has ~44,000 forecourts and a good portion of their annual profits and asset base that makes up their market capitalization comes from the object in this photo.

When most people look at the photograph below, they see a roof. In 2008 the cost of solar power was ~$4.50 /watt, today, it’s $.025 /watt – and falling! This roof is a full-sized solar array. Who cares? The person who lives in this house will never again need to visit a petroleum station, nor will they ever need to pay for electrical power, and as they adopt electrified transportation they become fully independent from the entire incumbent energy system. Ammatorize that over 25 years. Today, the average American house has ~400 lbs of copper. This house, although “off grid”, has in excess of 1,000 lbs of copper, including the back-up battery. 

Over 50% of daily crude oil consumption comes from transportation – personal vehicles (21%), trucks (23%), aviation (6%), marine & rail (6%). 

Re-tooling an entire industry … takes time. A long process that is painful. Ruinously expensive. Incredibly self-disruptive. Most people do not grasp the immensity of this pivot for these bygone era companies. From Ford to Porsche, they all acknowledge the future is now. Last week, GM announced a new platform and battery composition. VW has a “skateboard” they can build every new EV on. Too, the controlling family of VW fully endorses Herbert Diess’ plan to go fully electric. This entire pivot will occur in the next 10 years.  

This past week the OPEC + Russia meeting in Vienna ending in disaccord. They are squabbling, yet again, about curtailing daily crude oil output from the current ~1.5 Million bbl/day to ~3 Million bbl/day. This is important, because a 1-2 Million bbl/day over-supply has previously crushed the oil price by $50, $60, $70 /bbl. Russia would rather put pressure on US shale oil producers, and accelerate the future of oil production to an era much like Tobacco production. A great business for those that are already in it, and in the lower cost of the production curver. High cost producers, need not apply. So when the obvious demand destruction starts to occur – starting this decade – Russia, like the Saudi’s, will be the ones who set the price. 

What’s the longer term impact? As countless millions of structures begin to generate their own electrical energy, it is logical that the consumers and businesses in these structures use vehicles that are powered by electricity. In fact this is inevitable, especially as the world’s automotive manufacturers only produce EVs. The amount of copper that every Corporation in the Fortune 400 consumes, will in almost every case increase in a meaningful way in every quarter of every year for the rest of the decade. From VW to GM, Royal Dutch Shell to Amazon, they will all require a power of magnitude more copper to enable this pivot. 

Just recognize that the increase in copper demand has not yet started! One must wait until GM, VW, Porsche, et al, actually complete the factories to produce the products! That starts in the coming quarters and years …and for the rest of your life for that matter!