I just bought a plug-in hybrid car.
I love the technology. It's a daily challenge for me to use the least amount of gas possible. On its last tank, my new car got over 1000 kilometres (about 8 litres per 100 kilometres).
A few more people are thinking like me every day.
Over the past decade, demand for gas has been declining largely because fuel standards are improving. The infrastructure for battery powered cars improves every year. Just look at Tesla Inc. and what they are doing.
That company's stock is extremely overvalue, so don't rush out and buy it. However, the market loves industry leaders and new technology, and it could stay that way for years.
Tesla can swap your battery out at a change station faster than it takes to fill up your tank at the pump. The technology is impressive, and you do not even need to get out of your car.
I'm bullish on technology and innovation. The smart people of the world are constantly improving quality of life.
With battery technology advancing annually despite U.S. President Donald Trump's stupidity regarding climate change and the EPA, these numbers are likely to continue to improve.
I was in a new pickup truck a few weeks ago and it had the stop-start technology in it. This technology will be standard on most cars within a few years, and it will cut another 5 per cent off fuel demand.
Add to that jet engine efficiencies and I think you have the perfect storm of falling demand. True, the global population is increasingly urbanizing and the demand for autos is rising, but I could see demand for car and truck fuel to be almost non-existent within 20 years due to electrification.
Despite the fact the U.S. economy has increased by about 10 per cent since 2006, overall demand for unleaded gas, the biggest component of crude oil demand, is up about 5 per cent. And total gasoline demand is barely above the peak seen before the Great Recession. The one area where demand is growing is in the by-products of crude for chemicals and plastics. However, the overall number is still low compared to diesel and unleaded gas.
Those arguing for supply and demand coming back into balance and pushing prices higher are missing the long-term underlying theme.
When OPEC meets on May 25 to decide whether to extend cuts, they are up against the same problem previously faced. The U.S. and Canada have ample supplies for the next decade or more. While depletion will be a factor at some point, the forward curve says we have a long-run price closer to $50 than $60.
All that said, I was a buyer of oil ETFs this week when the sector was getting pounded on Thursday.
In the U.S., oil services stocks, as seen through the VanEck Vectors Oil Services ETF (OIH-N), have underperformed the world markets by 30 per cent this year and are the cheapest they have been since early 2016.
As I scan the ETF world each day to look for good value, there are not many places to find it. So, despite my long-term view that energy prices are at best range bound, dividends are now attractive again on a risk-adjusted basis, compared to the beginning of the year.
Don't mortgage the farm here to buy them, we could easily see WTI drop below $40 again if OPEC can't get Russia on board for an extension of the supply cuts.
If that happens, I'll be adding to my positions at lower prices.
As a value investor, I scale into positions when there is good relative value compared to other places. In the long run, the value approach pays dividends for the sleep-at-night factor. Momentum or growth investors may have periods of spectacular returns, but they tend to have way more anxiety when times get tough.