Good morning; here's what the Oilman has for you today:

• Fuel Demand…Sigh…

• Will Carbon Capture Make Money?

• Tweet of the Day

Fuel Demand…Sigh…

In case the crash of First Republic Bank wasn’t enough, here’s something else that should worry you: gasoline and diesel demand is on the wane.

Diesel is already down sharply, but now signs are emerging that gasoline demand will follow.

This ain’t your daddy’s fuel demand

Demand for gasoline and diesel—especially diesel—is a pretty good indicator of how an economy is doing.

When it’s doing well, demand for these is up. When it’s not doing so well…

Well, we get what we have in the U.S. right now.

Demand for diesel has plummeted in recent months due to a slowdown in manufacturing and freight.

High prices resulting from tight inventories didn’t help demand, either.

Now, gasoline may also be on its way down right when peak demand season is about to begin.

And that’s bad news for the U.S. economy.

First rule of Recession Club: Don’t say “recession”

“If you were looking at it in the closet and not knowing what the wider economy was doing, you would say we’re seeing some sort of an industrial recession.” That’s according to Tom Kloza from the Oil Price Information Service, and it’s as good a hedge as any.

It’s like there’s a law against saying out loud that the U.S. may be headed for – or is already in – a recession.

As if economic cycles no longer exist, and the mere suggestion they do is punishable by cancellation or something.

The truth is cycles do exist, and the pandemic made this particular cycle worse.

Also, it’s not the end of the world.

It just might feel that way for a while.

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Carbon Capture Will Make Money?

Oil production in the Gulf of Mexico is seen peaking in two years (seriously? 🤣 okay), set to reach 2.6 million barrels daily.

Anticipating the peak, some oil majors are turning to carbon capture and storage in the area.

Enter government tax credits

The much-hyped—and much-hated—Inflation Reduction Act includes tax credits of $85 per ton of CO2 captured and stored.

The oil industry is first in line for those credits.

It’s got the facilities. It’s got the expertise. And it’s lining up the finance to expand.

The Gulf makes perfect sense for carbon capture and storage – it’s got a lot of CO2 to capture.

With oil output set to rise, the amount of capturable, tax-creditable CO2 will also rise.

No wonder analysts expect that CCS "will certainly become an important part of the business activity" in the Gulf.

This to the frustration of the green lobby, which wants oil and gas production ended once and for all.

Tough luck. There’s gov’t tax credits at play here.

The industry is getting really serious

According to Reuters, a quarter of presentations at this week’s Offshore Technology Conference will be about CCS, offshore wind, and other renewables.

To compare, presentations on drilling, completions, and reservoir engineering will only make up 15% of the total.

Drilling and completions are boring hard.

Carbon capture and offshore wind is where all the excitement easy write-offs lie.

And with offshore wind looking more and more problematic (think costs and marine life destruction), chances are CCS is set to shine.

It’s a no-brainer. With CCS, everybody wins.

Except taxpayers…

And the environmentalists that hate it, that is. And they hate it because Big Oil is doing it.

You can’t make everyone happy.

Around the Global Patch

🇦🇺 Shell announces sale of Australian browse project stake.
🇨🇳 Oil prices stagnant as demand woes persist in China and the U.S.
🇷🇺 Resuming forex buying thanks to surging oil and gas profits.

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