The Dow Chemical Company (DOW), Navistar International Corp (NAV) & More: Why Global Oil Demand Could Soon Peak

Citigroup Inc. (NYSE:C) stoked a major debate when it argued earlier this year that America would become energy independent by 2020. Now the bank is out with another bold new call. In a research paper titled “Global Oil Demand Growth — The End Is Nigh,” Citigroup argues that global oil demand is “approaching a tipping point.”

The bank suggests there are two factors underpinning this expected trend. Let’s take a closer look at both of them, as well as the shocking conclusion Citi draws about the future of oil prices.

Shift toward natural gas
The first factor is a transition away from oil and toward natural gas as a fuel source. The shale gas revolution has already provided American consumers and companies with cheap and abundant supplies of the clean-burning fuel. It has even ushered in a so-called “renaissance” for domestic manufacturers, including chemical manufacturer The Dow Chemical Company (NYSE:DOW) and steelmaker Nucor Corporation (NYSE:NUE), which have moved or are planning to move plants that were previously relocated abroad back to the United States.

In addition, several U.S. truck manufacturers are capitalizing on cheap natural gas by equipping new vehicles to run on nat gas instead of diesel. For instance, Navistar International Corp (NYSE:NAV) reckons that over the next two years, a third of all its new trucks will be powered by natural gas instead of diesel.

Natural gas engine manufacturers such as Cummins Inc. (NYSE:CMI) and Westport Innovations Inc. (USA) (NASDAQ:WPRT) will play a major role in driving this shift. In February, the two companies said their joint venture, Cummins Westport, is providing engines for two of the biggest natural gas transit fleet orders ever filled in North America.

Both see massive potential in the North American long-haul trucking market, especially as companies such as Clean Energy Fuels Corp (NASDAQ:CLNE) develop the natural gas refueling infrastructure necessary to support the transition toward gas-powered vehicles. Having already built dozens of new LNG truck fueling stations, Clean Energy plans on completing an additional 70 to 80 LNG fueling stations adjacent to long-haul trucking routes and key warehouse distribution centers across North America.

If the price of natural gas remains cheap compared with diesel, projects such as these should continue to flourish.