In 2020, ARK Invest CEO and CIO Cathie Wood predicted that oil demand had peaked and with the world shifting to electric vehicles, lower oil demand would result in prices falling to $12 per barrel. We all know this didn’t happen, and almost a full two years later, she finally admits she got it wrong.
But as prices go up from $40 per barrel at the time of her prediction to trading $122 a barrel midday Tuesday amid Russia’s ongoing invasion of Ukraine, Wood still claims that “oil prices will collapse under the weight of lower demand” in the long term. Although how long “long term” is wasn’t specified – it’s just longer than she expected.
Wood believes that the skyrocketing prices will lead to an accelerated shift toward electric vehicles and that this will “destroy oil consumption at the margin.” Her company ARK Invest has a stake worth over $1 billion in Tesla (NASDAQ: TSLA), the electric vehicle maker, through the Ark Innovation ETF (NYSE: ARKK).
In an earlier tweet, Tesla’s Elon Musk called to increase oil and gas output, citing that “sustainable energy solutions simply cannot react instantaneously” to make up for Russian oil and gas exports.
US oil companies have made it clear in their February earnings calls with investors that they are unlikely to produce much more, according to the Wall Street Journal. The extra cash from today’s higher profits is being used to pay off debts from the pandemic crash, for share buybacks and dividends, and not to invest in new production.