1）We are in the midst of the fourth major oil investment bust since 1900, and while this cycle is different in some critical ways (particularly the speed at which investment translates into output), the big picture process is the same as in previous cycles.
in the midst of处于之中bust重击，破产critical严重的particularly the speed at which investment translates into output特别是投资转化率的速度
2）Commodity investment cycles tend to follow a broadly classic process:
商品投资周期，broadly大体上
3）1) In the first phase, a pickup in commodity-intensive growth causes a global surge in demand for commodities to outstrip supply. 4）As demand pushes up against capacity limits, prices rise.
第一阶段，pickup增多，好转intensive集中的surge上涨outstrip比 跑得快。当需求强劲超过产能上限，价格高涨。
5）2) In the second phase, high prices caused by the supply and demand imbalance induce large amounts of capital expenditure. 6）As prices rise, margins for commodity producers widen and profits increase. 7）These producers, flush with cash and looking at high prices, invest in profitable opportunities to expand production. 8）There is a massive investment boom. 9）This acts as a support to growth and inflation as capital expenditure accelerates.
induce吸引资本加速支出，massive大规模投资boom繁荣期
10）3) The third phase is typically marked by a slowdown in commodity demand that occurs when the original growth that sparked the cycle fades and high prices incentivize reductions in demand growth, by encouraging substitution and efforts to improve efficiency. spark引发incentivize激励reductions缩减，追求替代物提高效率。11）Simultaneously, the investment boom begins to bring new supply online, demand/supply imbalances ease, and prices stabilize. online启动，ease减轻，stabilize稳定。12）Thus, high prices help set in motion the increase in supply and reduction in demand that eventually lead to the turning of the cycle.处于某种运动中set in motion
13）4) In the fourth phase, there is a supply glut. supply glut供给量，供过于求14）The balance between demand and supply swings sharply in the other direction, as production is much greater than demand. 15）This phase is typically characterized by large price declines.characterized 是 的特征
16）5) As prices fall, margins for commodity producers are squeezed. 挤压，消减17）And, in the fifth phase, producers respond to low prices by slashing investment and in some cases shutting down production permanently. 砍伤18） This decline in supply eventually brings the market back into balance, as the low investment deteriorates capacity, sowing the seeds for the next cycle.恶化产能deteriorates capacity
19）We are currently in stage 5 of the most recent cycle, where years of investment have left the market oversupplied and prices at the lowest level in a decade.20） The move in oil prices has resulted, as one would expect, in a collapse in investment that is no longer profitable. collapse倒塌21）For most of 2016, there will likely continue to be a significant spot oil glut, as the lag between production and investment means that cuts will only gradually bite into production. 处于a spot供过于求的处境 22） However, unless prices rise significantly, supply will likely fall short of demand some time in 2017, leading to one of the most significant shortages in the history of the oil market soon thereafter.此后，thereafter24） At this point, the forward price of oil does not appear high enough to create the needed investment, and the longer oil prices remain low, the larger the future gap between supply and demand is likely to be.
25）Before we dig into where we stand in the current oil investment cycle, it is worth offering some perspective on the major oil investment booms and busts over the last 100 years. 25）The chart below shows the four major oil investment booms since 1900 and the price levels that spurred them.激励26） In the appendix, we describe each of these past booms. 27）While the details of each cycle are different, the cause and effect linkages that drive them are the same.联系linkage
28）The current leg down in the commodity investment cycle (and accompanying decline in prices) has severely impacted the medium-term outlook for oil supply. 下跌leg down29）While there is lots of uncertainty around exactly how long the market will remain out of balance, a particularly large reduction in supply could leave the market undersupplied as soon as 2017.30） In the near term, cuts in shale investment have and will continue to bite into production, and the supply issue is amplified going forward, as massive capex cuts from more traditional producers (with longer lag times between investment and production) flow through to supply. 放大增强amplified，capital expenditure capex资本支出lag时间间隔31）As described above, the supply glut phase of the cycle sows the seeds for a price rebound, which is necessary to allow supply to catch up with demand.反弹rebound 32） Below, we walk through our picture of the current supply and demand dynamics in more depth.
33）Low Oil Prices Have Led to a Sharp Pullback in Investments大幅回落 a Sharp Pullback
34）At current spot and forward prices, most of the world’s investment opportunities are uneconomical. 不划算，不经济的uneconomical 35）Consistent with this picture, over 20% of global oil capex was cut in 2015, and further cuts of at least 15% are likely this year. If prices remain low, we are likely to see capex collapse even further.
breakeven盈亏平衡点
36）US Shale Production Has Already Turned and Will Continue to Decline in the Coming Year
37）So far, US shale is the main source of oil supply where production has already turned, and production is likely to continue to decline over the next year.38） US shale production is much more responsive to prices than traditional sources of production—high decline rates mean that practically continuous reinvestment is required to maintain production levels.反应灵敏的more responsive to，几乎practically 39）The time between initial investment and oil extraction is also significantly shorter for shale, meaning that capex cuts hit production faster in current (and future) cycles than has been the case historically.石油开采；提炼油oil extraction 40） The dynamic nature of shale, combined with its relatively high cost of production, makes it particularly vulnerable in today’s price environment.生产成本相对较高 relatively high cost of production
41)As a result, rig counts have plummeted to 2010 levels and production started to decline in the second half of last year, ahead of traditional counterparts. 暴跌plummeted 去年下半年in the second half of last year42）Declines in shale production thus far have actually been smaller than many expected, in large part because companies have managed to focus on only their most productive wells and to tighten their belts in typical cyclical ways (by firing employees, squeezing service providers, etc.). 循环的cyclical 44）However, there are limits to how long companies can fight the tide of falling oil prices with this type of cost cutting. 潮水tide45）Additionally, because many of these cost-saving measures are tied to oil prices and associated activity levels, the positive impact of a price increase on shale production is somewhat muted by the fact that these costs would also increase.被抑制的muted
45）Outside of Shale, Production Has Not Yet Turned but Will Likely Decline Meaningfully in the Coming Years
46）While investment has been cut across all sources of production, non-shale supply has not yet turned, as past investments continue to come online.启动 47）Non-OPEC supply outside of the US is set to start declining gradually in the coming months, and we are likely to see a meaningful acceleration in supply declines beyond 2017, as the massive cutback in investment over the past year flows through.开支的消减cutback48） OPEC production has actually increased over the past year, as OPEC stepped away from its role as swing producer and chose instead to produce at nearly full capacity.swing转向生产者49） The return of Iranian production following the lifting of nuclear sanctions is expected to provide a near- term boost to production, but OPEC output is otherwise expected to remain flat at high levels over the next few years.lifting取消解除，继解除核制裁之后，伊朗生产预计将提高产量，但OPEC产量预期将保持在高位不变，在未来几年内。
ram up production抬高产量
50）While Low Oil Prices Have Led to a Bleak Supply Outlook, Demand Is Expected to Grow at a Moderate Pace.暗淡的bleak温和的速度a moderate pace
51）Global oil demand will continue to grow at a moderate pace, driven entirely by the EM world, against a backdrop of modest global growth. 新兴市场EM world背景a backdrop of52）While oil demand is driven primary by economic growth—which typically accounts for around three-quarters of the change—it is also affected by the oil price itself.由于account for53） Demand has received a boost from this cycle’s price decline, which will fade over the coming years.衰减fade
54）From a sector demand perspective, the transportation and petrochemical sectors are likely to account for the majority of demand growth.从行业需求的角度出发，运输行业，石化部分 占有account for 55）The transportation sector, which accounts for 55% of global oil demand, is likely to grow at a modestly slower pace in coming years, as pressure from rising fuel efficiency regulations (such as CAFE standards in the US) is somewhat offset by continued vehicle fleet growth in the EM world.抵消offset 快速的fleet56）Feedstock demand from the petrochemical sector is expected to be strong, as past investments in chemical plants come online to meet rising EM demand for plastics.原料feedstock启动online塑料制品plastics 57）Oil is also expected to continue to lose market share to renewables and other sources of energy in the power sector, though the impact will be fairly small as little oil is used for power generation at this point.失去市场份额lose market share
OECD经济合作与发展组织（工业化国家鼓励贸易和经济发展的组织）
58）Below, we highlight some of the dynamics affecting transportation sector demand.突出着重说明
59）Rising Fuel Efficiency Standards Will Be a Drag
60）As environmental concerns mount, governments across the globe have made a big push to increase fuel efficiency,manifesting in lofty standards for carmakers and penalties for noncompliance.加剧，增加mount加大made a big push能源效率fuel efficiency 高大lofty违约行为不履行noncompliance61）For example,US CAFE standards call for roughly 4% annual efficiency gains in new cars, twice the rate we’ve seen over the past decade. US CAFE美国能效标准，要求；提倡；号召call for62）Other regions, such as China, the EU, and Korea, have set similarly aggressive targets, as shown below.
The fuel economy of an automobile is the [fuel efficiency] relationship between the distance traveled and the amount of [fuel] consumed by the vehicle. Consumption can be expressed in terms of volume of fuel to travel a distance, or the distance travelled per unit volume of fuel consumed. Since fuel consumption of vehicles is a significant factor in air pollution, and since importation of motor fuel can be a large part of a nation's foreign trade, many countries impose 强制实行requirements for fuel economy. Different measurement cycles are used to approximate the actual performance of the vehicle. The energy in fuel is required to overcome various losses (wind resistance风阻力, tire drag, and others) in propelling 推进the vehicle, and in providing power to vehicle systems such as ignition or air conditioning. Various measures can be taken to reduce losses at each of the conversions between chemical energy in fuel and kinetic energy of the vehicle. Driver behavior can affect fuel economy; maneuvers such as sudden acceleration and heavy braking waste energy.
Electric cars do not directly burn fuel, and so do not have fuel economy per se, but equivalence measures, such as [miles per gallon gasoline equivalent have been created to attempt to compare them.
62）To illustrate the point, full adherence to CAFE standards in the US would result in a reduction of oil demand by about 0.5 mb/d by 2020. 完全遵守full adherence to63）If other countries follow a similar pattern, the impact has the potential to be meaningful for global demand. 64）That said, it’s hard to know to what extent companies will actually adhere to standards if consumer preferences are at odds with policy objectives.相抗争at odds with65） The chart on the left below lends some historical perspective to the case at hand. 66）Past increases in fuel efficiency have been accompanied by large increases in oil prices—in this instance, standards are competing with low fuel prices. 67）In addition, current CAFE standards call for more sustained and faster improvement than we’ve seen at any point over the past 35 years. The stated regulations appear to be a high target (and could change in upcoming reviews if the goal winds up being too lofty).审查reviews
compliance遵从
68）But Rising Vehicle Penetration in Emerging Markets Is Exerting Upward Pressure on Demand上升的汽车普及率
69）Increasing demand for vehicles from emerging market consumers is likely to somewhat offset the downward pressure from rising efficiency standards.70） Most of the demand growth within the transportation sector is likely to come from EM economies, such as China and India, which are seeing growing middle classes. 71）In particular, these countries are expected to see a rapid increase in vehicle penetration off of very low levels.这些国家看到一个快速增长的非常低的汽车普及率水平。72） The charts below illustrate this dynamic for cars, though it is equally valid for light trucks and heavy vehicles as well.
73）And the Impact from Fuel Switching Will Be Limited in the Next Few Years燃料转换fuel switching
74）Disruptive technologies like electric- and natural gas-powered vehicles have the potential to displace a significant amount of oil demand in the longer term, but current economics are unfavorable and logistical bottlenecks stand in the way of near-term mass adoption.引起混乱的，颠覆性的disruptive当前经济是不利的，后勤保障的瓶颈，大规模采用 75）For electric vehicles, the necessary battery technology to incentivize mass adoption is likely at least a few years away. 激励76）Additionally, the lag between investment in battery factories and production is sufficiently long (and the current investment level is sufficiently low) to make expectations of mass adoption within the next five years impractical, barring a technological breakthrough in the production process.不切实际impractical阻挡bar 77）In the case of natural gas vehicles, high upfront costs (which are only slowly improving), infrastructure bottlenecks (e.g., fueling stations), and the current limited availability of natural gas/LNG shipping in many regions present major near-term roadblocks.upfront预付的roadblock路障
78）For example, the charts below show a range of possible paths for electric vehicle demand—in even the most bullish scenarios, only 0.2-0.3 mb/d of oil are expected to be displaced over the next five years.最乐观的方案the most bullish scenarios
79）Inventories Are Helping to Bridge the Gap, but Limited Cheap Storage Capacity May Be a Downward Pressure on Prices in the Near Term存货
80）Oil supply can be met by demand or stored as inventory. The price of oil will reflect how these net out. 81）Inventories today are helping to smooth an oversupplied market, as they move supply from today into the future.82） For this mechanism to work, market participants have to be willing and able to buy oil today and pay the costs associated with storing it, because they can sell at a future date for a price where they make a profit. 机制途径，mechanism83）Over the past year and a half, the steep oil futures curve has incentivized a rapid build in oil inventories.陡峭的steep
84）Reported OECD inventories are at record highs, and US commercial storage (especially Cushing) is operating at close to 90% utilization rates. 地名Cushing85）While it’s difficult to know precisely how close we are to actual capacity limits, there is a risk that this storage capacity fills and oil has to be increasingly stored in more expensive offshore tankers or even shut in, which would be a downward pressure on oil prices and likely require even lower prices than are discounted for the upcoming year海上境外的offshore 关井；关进去；禁闭shut in已折扣的
86）Barring a Significant Price Increase, Oil Markets Will Likely Shift to Undersupply by 2017
87）Overall, unless prices change, we expect the oil glut to lead to a major shortage starting at some point in 2017.供过于求glut 88）The following chart shows what we expect for oil supply and demand, given the prices prevailing in forward markets. If the price move to change the investment comes too late, the price moves could be large and disruptive.占优势的prevailing破坏性的，引起混乱的disruptive
89）Appendix: A Brief History of Oil Investment Cycles
Below, we walk through some historical examples of oil cycles to show how oil investment cycles have played out over time, in order to provide some perspective on the current cycle and what we might see going forward. 90）Each cycle brought online new sources of production and diversified where the world got its oil from.启动online
91）There have been four major investment cycles in the oil market, where high prices have incentivized investment that eventually unlocked new sources of supply.92） Indeed, in the same way that high oil prices have unlocked unconventional oil sources in the most recent boom, crude oil production was initially developed as an alternative lighting fuel to whale oil, the dominant source of the day, whose price escalated as the result of decades of overfishing.鲸油whale oil使 上涨escalated 93）Each oil boom brought on new supply to the market, either from the discovery of new fields or from tapping known fields that previously weren’t economically or technologically feasible.tap开发feasible可行的
94）• The first real investment cycle in oil occurred in the 1910s, as the automobile age ushered in a new source of demand for oil.开启ushered in 95） The surge in demand was dramatic—US motor vehicle registrations rose from 0.1 vehicles per 1,000 residents in 1900 to 87 by 1920—and oil prices rose with it, doubling in real terms over the course of the decade.把 增加一倍doubling扣除物价因素；按实值计算；按实质计算in real term整个the course of 96）This dynamic incentivized a wave of investment that unlocked new fields in Texas, Oklahoma, California, and Louisiana. 97）All this supply came online at the same time that the Great Depression was hitting demand, and prices fell by more than 70% in the early 1930s.
98）• Demand growth from WWII, in combination with the discovery of the massive East Texas oilfield (the largest in the US), kicked off an investment boom that lasted decades. 拉开序幕kicked off 99）During and after WWII, the price of oil was largely government regulated, which limited the degree of overheating and overinvestment.100） Starting in WWII, this boom saw the development of new sources of production in the emerging world, in particular the USSR and the Mideast.苏维埃社会主义共和国联盟(Union of Soviet Socialist Republics) 101）During this time, the US share of global production halved, as supply came online from these new regions.对半分halved 102） This supply built over time and, in combination with a slowdown in demand growth resulting from the US recession in the early 1960s, pushed the market into surplus. 伴随衰退in combination with a slowdown 过剩surplus 103）While the US, led by Texas, moderated production in order to sustain flat nominal pricing, the real price of oil declined by a third in the 1960s. moderated production in order to sustain flat nominal pricing温和的产量，名义上的平坦价格
104）• The OPEC price shocks (in ’72 and ’79), coupled with a flood of liquidity in the wake of the Bretton Woods breakup, led to a boom in investment in novel resources in Alaska, Russia, Latin America, and the North Sea. 仿效；紧跟；随着in the wake of 爆发breakup 新的资源novel resources 105）However, demand waned in the face of skyrocketing prices, and the market had to work through significant oversupply, with prices falling by 50%. Higher-cost producers cut investment spending in the face of compressed margins and deteriorating balance sheets, and credit problems emerged in Latin America, where governments had not only pushed to invest in new sources of oil but had taken on foreign borrowing to finance this investment.衰落waned恶化的资产负债表deteriorating balance sheets
Bridgewater® Daily Observations 3/31/2016
