Cathie Wood admits short-term defeat in her call for oil to plunge to $12 per barrel, but still expects prices to crash 'under the weight of lower demand'
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- Cathie Wood has admitted short-term defeat in her 2020 prediction that oil prices would crash to $12 per barrel.
- WTI Crude Oil prices soared to $120 per barrel on Monday amid Russia's invasion of Ukraine.
- "I got the supply shock wrong. That said, the accelerated shift toward electric transportation will destroy oil consumption at the margin," Wood said.
A few months after oil prices briefly dipped into negative territory in 2020, Ark Invest's Cathie Wood made the bold prediction that another crash was coming.
"Oil demand probably hit a secular peak last year and, thanks to electric vehicles, now is in secular 'decline.' Though ARK has no formal forecast, I believe that oil prices are on their way back to $12, the level reached after the 1973 oil cartel crisis, or lower, now that EVs are taking off," Wood tweeted on July 15, 2020.
But since oil prices bottomed in 2020 amid the COVID-19 pandemic, which destroyed demand and led to a brief oversupply shock, oil prices have done nothing but soar. On Monday, WTI Crude Oil spiked to $120 per barrel, reaching its highest level since 2008.
The surge in oil prices comes as transportation demand recovers thanks to a receding COVID-19 pandemic. But the recent surge has been exacerbated by Russia's invasion of Ukraine and growing global threats of boycotts of Russia's oil. Russia is responsible for about 10% of the world's total oil production.
Given the wide dispersion between Wood's oil target and today's reality, the innovation investor admitted defeat in a tweet on Monday, but recommitted to the idea that oil prices will eventually crash to the teens, representing a 90% decline from current levels.
"I got the supply shock wrong. That said, the accelerated shift toward electric transportation will destroy oil consumption at the margin. Long term, though longer than I expected, oil prices will collapse under the weight of lower demand," Wood said.
Wood blamed the Biden administration's "energy insecurity policies," the growth of ESG investing mandates, which often limit investments in oil companies, and Russia's invasion of Ukraine as reasons for the surge in oil prices.
But those higher prices "will accelerate demand destruction" as they become more and more untenable for everyday consumers in the long-term. And for as long as oil prices stay elevated, the attractiveness of an electric vehicle and its ability to sidestep the gas pump will grow for consumers.
"Innovation solves problems!" Wood said.
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