From The Guardian.
The rise in demand for datacentres, driven in no small part by the hype around AI systems, is fuelling an increase in demand for electricity.
This excellent, in-depth feature from Bloomberg charts the rise of data centre electricity demand, how it may outstrip the supply of electricity from renewables, and more.
China's extremely rapid adoption of EVs has forced oil giant Sinopec to adjust its forecasts, saying peak domestic gasoline demand has already passed and it's all downhill from here. The repercussions will be global; China has been the biggest growth market for refined oil products for more than 20 years.
According to CNEV Post, Chinese new car buyers are now choosing "new energy vehicles" (NEVs, meaning battery-electric and plug-in hybrid cars) at a rate of 37.8%, a percentage which has rocketed up from 30.0% in 2022, 15.5% in 2021 and just 5.4% in 2020.
While Scandinavian countries like Norway (87.8%), Iceland (56.1%) and Sweden (56.1%) led the world for EV adoption in 2022, China sells somewhere around 10 times more EVs than all those three combined, and there's a lot more room for growth in the world's second-most populous country, since as of 2022, less than 5% of cars on Chinese roads were NEVs.
So China's largest oil company Sinopec is already seeing a drop in demand, from which it doesn't expect to recover. Previous predictions placed peak demand somewhere in 2025, but at a conference in Zhengzhou in August, Bloomberg reported that one Zhou Yan, from Sinpoec's retail sales division, said EVs were already displacing some 15 million tons of Chinese oil product sales in 2023, and that the company is forecasting that 2024 and subsequent years will see declining demand.
According to the International Energy Agency, Chinese demand accounted for more than 70% of global oil market growth in 2023, so while global oil product sales are at record highs of around 102.2 million barrels per day in 2023 (up around 2.2 million barrels per day over figures from 2022), and gasoline for passenger cars is only a percentage of total oil product demand, it'll be interesting to see how China's rapid EV uptake affects predictions for global peak oil demand.
The IEA released its forecast in June, estimating that peak global oil use for transport will arrive around 2026, but strong demand from the petrochemical and aviation sectors would continue to support overall market growth, albeit at slower rates, at least as far out as 2028.
A global oil demand peak, then, could arrive before the end of the decade. And unexpectedly rapid transitions to cleaner vehicles like what we're seeing in China, as well as continued increases in fuel economy for new fossil burners, could bring that date closer.
Fuel demand in two and three-wheeled vehicles is already in structural decline, with BNEF estimating that 70% of total kilometers traveled by these vehicles already switched over to electric. Fuel demand for cars will be the next to turn, since well over 5% of the passenger-vehicle fleet is now either battery-electric or plug-in hybrid. The internal combustion vehicle fleet is also becoming more efficient due to rising fuel-economy targets.
Diesel demand for heavier vehicles will keep growing for a bit longer, but even there a seismic shift is underway. Electric, fuel cell and battery-swapping options have quickly climbed to 12% of light commercial vehicle sales and 4% to 5% of medium and heavy commercial vehicle sales. That heavy-duty figure is likely to climb to over 10% by 2025.
Combine all those segments, and BNEF expects total oil demand for road transport in China to peak late next year. Demand won’t drop off a cliff anytime soon — fleet turnover in the trucking segment in particular will take time — but it still marks a major shift for global oil demand patterns. It also has big implications for refiners that need to quickly adjust the mix of products they produce.
Welcome to Energy Daily, our guide to the energy and commodities markets powering the global economy. Today, Energy Reporter Dan Murtaugh reflects on China’s solar power and EV booms, and suggests the country is reaching a tipping point in its energy transition. To get this newsletter sent straight to your inbox, you can sign up here.
A singer wailed while a guitarist ripped off a solo in front of a crowd so packed it was impossible to walk through. But this wasn’t a rock concert. It was the scene around automaker BYD Co.’s booth at a Chinese solar power conference.
The SNEC PV Power Expo drew around half a million people to the Shanghai New International Expo Center last week: everyone from European utility executives looking for deals on panels to curious tourists hoping to grab some free merchandise.
As well as BYD, China’s largest automaker, Tesla Inc. was there, along with Contemporary Amperex Technology Co. Ltd., the world’s biggest electric vehicle battery manufacturer. They joined thousands of domestic solar companies. The buzz was reminiscent of the auto show in Shanghai a month earlier, when onlookers thronged around the latest EV models.
The excitement around solar and EVs suggests China is nearing an inflection point in its energy transition more than a half-decade before a 2030 target to peak emissions. It no longer requires heavy government subsidies to push people away from fossil fuels. Cheap solar panels are a better way to make money than burning expensive coal, while EVs are cheaper to operate — and increasingly more fun to drive — than gasoline-powered vehicles.
BloombergNEF lifted its forecast for China’s 2023 solar installations last week. It now expects the country to add nearly three times the capacity it did just two years ago, or more than the entire total in the US. EVs, meanwhile, made up more than a third of all vehicle sales in China last month.
That’s bringing China closer to the tipping point where fossil fuel use falls into long-term decline, a milestone that could be reached as soon as next year, according to the Centre for Research on Energy and Clean Air.
The road ahead won’t be easy — grid improvements will be needed to keep solar going at its current pace, panel manufacturers face shrinking margins on robust competition, and battery makers will need to avoid supply chain bottlenecks.
The planet’s largest polluter still burns a lot of coal. But the progress on solar power and EVs show it’s well on its way to a less carbon-intensive future.
 |
| Source: Reuters |
From Bloomberg
Just when it seemed the US regional banking strains were starting to ease, First Republic Bank has leaped back into headlines, reigniting concerns of rising pain in the lending system.
Banks increased emergency borrowing from the Federal Reserve for the second week in a row in a sign of the ongoing stress in the system. Last week, the New York Fed reported that financial conditions in its region had deteriorated sharply.
The trouble is rekindling concern that a credit crunch is underway. And it further complicates the plan for next week’s Fed policy meeting, where officials have to figure out how to balance the risks of tighter borrowing conditions against stubbornly high inflation.
Below are six charts that help explain why and how borrowing is getting harder in vast parts of the economy:Lending Contraction
“Lending from U.S. banks is poised to contract over the next few quarters,” Amanda Lynam, head of macro credit research at BlackRock Financial Management wrote in a note on Thursday. Headwinds to profitability including higher deposit costs have seen bank spreads underperform relative to non-financials, she wrote.
Money Supply
The blow to credit availability comes as the money supply shrinks, a sign that the spike in interest rates by the Fed is causing money to exit the banking system, shrinking the availability of loans. That could slow the economy, with monetarist economists suggesting it could herald a crash and deflation.The Dallas Fed and the San Francisco Fed last week reported pressure on funding in their geographic regions, with projects being canceled and nonperforming loans expected to increase.
Consumer Headwinds
Banks that posted quarterly results this month said they boosted provisions on bad consumer loans to levels not seen since the early days of the pandemic. For example, Capital One Financial Corp. increased its provision for credit card losses by more than 300% to $2.26 billion compared with a year earlier. The firms have generally said the rising provisions are just consumers returning to pre-pandemic norms.
Office Woes
Capital One also set aside more money to cover souring office loans, as vacancies rise and many workers choose to work from home. Morgan Stanley has previously estimated that office property valuations could fall as much as 40% from peak to trough, increasing the risk of defaults.
Another emerging source of stress in credit is the leveraged loan market as corporate borrowers with floating-rate debt struggle to keep pace with higher borrowing costs.
Higher Defaults
The amount of loans trading at distressed prices, defined as below 80% of face value, has jumped 26% to about $127 billion since the end of February, according to data compiled by Bloomberg. That compares with a 10% increase for bonds to about $488 billion.
“We believe the loan market, which has historically had a lower default rate than the high yield bond market, will record a higher rate during this cycle,” Armen Panossian and Danielle Poli, managing directors at Oaktree Capital Management LP, wrote in a memo last week. “This is due to the covenant-lite nature of most loans and the rising prevalence of loan-only capital structures.”
Credit Chatter
Company executives worldwide, meanwhile, are talking about credit on conference calls at the highest rate since the pandemic hit, according to data compiled by Bloomberg News. Some mentions include Evercore Inc.’s Chief Executive Officer John Weinberg noting an increase in restructuring and liability management business and Peabody Energy Corp. investor relations vice president Karla Kimrey saying the company has positioned itself to avoid uncertain credit markets.
