Peak Oil Demand Coming to an End Sooner Rather than Later
Would you invest in a sector that has experienced a 10-year average demand growth rate of 1% (light gray line on the chart here below) – which is far below the global GDP growth rate – and is farther declining, while competing transportation and electricity generation sectors are at the tipping point of their exponential growth phase?
Inverse Relationship between Oil Demand Growth Rate and Inflation Adjusted Oil Price
Declining Activity
Would you invest in one of the largest public company of this low growth and highly competitive sector whereas its refining capacity has been declining year after year?
EXXON MOBIL refining capacity in thousand barrels per day from 2011 to 2016
Declining Sales
Would you invest in this same company, which sales of petroleum products may have peaked more than 15 years ago and have declined dramatically since then, while sales of prime products have been stagnant at best over the same time period?
Petroleum product sales of ExxonMobil’s Downstream division from 2001 to 2016
ExxonMobil Chemical’s sales of prime products from 2001 to 2016
Declining Premium vs. Underlying Commodity
Would you invest in a commodity play that sees its performance compared with the underlying commodity reverting to the downside?
Monthly price ratio between Exxon Mobil stock (XOM) and Light Crude Oil
Lame Duck Stock Price Increase
Would you buy this stock, which price – adjusted for dividend payments – is limping uphill out of breath despite recurrent shares buybacks, a technical situation that probably presage an abrupt reversal to the downside in the years ahead?
Exxon Mobil Yearly Stock (XOM) Price Adjusted for Dividend Payments
Lithium for Electric Batteries
The closest comparison with a leading public petrochemical company that produces fuels for transportation and energy storage is probably another leading public chemical company that produces lithium for… transportation and energy storage and which stock price adjusted for dividends has been multiplied by more than twenty times since the year 2000.
Albermarle Quarterly Stock (ALB) Price Adjusted for Dividend Payments
Fuels vs. Lithium Stocks, an Indisputable Verdict
Not surprisingly the XOM/ALB stock price ratio clearly demonstrates that the Lithium stock has massively outperformed the fuels stock since the year 2000:
Quarterly Exxon Mobil / Albermarle Stocks Price Ratio
This comparison is more generally valid for the sectors since the Lithium & Battery Tech ETF has outperformed the United States Oil Fund by a factor of thirty since the year 2013:
Monthly Price Ratio between Lithium & Battery Tech ETF and United States Oil Fund
Conclusion
Without the shadow of a doubt Big Oil companies are doomed as the peak oil demand will happen sooner rather than later. The Exxon Mobil stock price has been kept under artificial respiration for so many years so that when the music will stop there will be no escape for most if not all oil majors. On the contrary Lithium miners are facing a growing demand at the tipping point of the exponential growth curve that should last a decade or so and which portends a strong sector performance for many years to come.
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