How Close Are We To Peak Oil Demand?
Editor OilPrice.com
Sun, June 5, 2022
Two years ago, British oil and gas supermajor BP Plc. (NYSE:BP) sent shockwaves through the energy markets after it declared that the world was already past Peak Oil demand. In the company's 2020 Energy Outlook, chief executive Bernard Looney pledged that BP would increase its renewables spending twentyfold to $5 billion a year by 2030 and "... not enter any new countries for oil and gas exploration".
That announcement came as a bit of a shocker given how aggressive BP has been in exploring new oil and gas frontiers.
When many analysts talk about Peak Oil, they are usually referring to that point in time when global oil demand enters a phase of terminal and irreversible decline. According to BP, this point has already come and gone, with oil demand slated to fall by at least 10% in the current decade and by as much as 50% over the next two. BP noted that historically, energy demand has risen steadily in tandem with global economic growth with few interruptions; however, the COVID-19 crisis and increased climate action might have permanently altered that playbook.
However, BP has been forced to do a mea culpa after it became clear that the COVID-19 pandemic that began more than two years ago has not resulted in a significant reduction in oil demand.
In its Energy Outlook 2022 edition, BP has revised down its forecast for global economic growth saying global GDP will only contract 1.5% by 2025 from 2019 levels compared to its earlier projection of a 2.5% contraction.
BP notes that its former grim outlook was prepared prior to the Russian invasion of Ukraine-- another black swan event--which has driven global energy prices higher and cast an uncertain shadow over Russia's oil and gas sector in recent months.
The Scenarios
In its latest report, BP offers three scenarios--all foresee oil demand surpassing pre-pandemic levels by the middle of this decade before beginning to slip to varying degrees.
In the most bullish case for oil, BP projects that crude demand will rise to 101 million b/d in 2025 and remain flat into 2030. After that point, global demand retreats to 98 million b/d by 2035 and to 92 million b/d by 2040.
In yet another scenario that BP has termed "net-zero," which is the most aggressive in terms of global climate ambitions being achieved, the company pegs 2025 demand at 98 million b/d and just 75 million b/d by 2035. BP assumes that a 95% reduction in greenhouse-gas (GHG) emissions must be achieved for the net-zero predictions to come true.
In the middle-of-the-road scenario, BP assumes that the world will still be broadly in-line with climate goals but with a 75% reduction in GHG emissions by 2025. This picture of the future suggests that oil demand will be around 96 million b/d in 2025 and 85 million b/d by 2035.
However, recent events in the energy sector suggest that oil companies might get a leeway to grow production and even relax climate goals as long as oil and gas prices remain high.
Last year, Exxon Mobil (NYSE:XOM) found itself in trouble after a tiny hedge fund by the name Engine No. 1 successfully waged a battle to install three directors on the board of Exxon with the goal of pushing the energy giant to reduce its carbon footprint. Engine No. 1 enjoyed the stunning victory thanks to support from BlackRock, Vanguard and State Street who all voted against Exxon's leadership.
Luckily, Exxon has finally managed to turn the tables and get shareholders on its side: last week, Exxon recorded a major victory after its shareholders supported the company's energy transition strategy at the annual general meeting.
Only 28% of the participants backed a resolution filed by the Follow This activist group urging faster action to battle climate change; a proposal calling for a report on low carbon business planning received just 10.5% support, while a report on plastic production garnered a 37% favorable vote.
In other words, it appears that Exxon's legacy fossil fuel business remains safe, at least for now, as long as it keeps returning that excess cash to shareholders in the form of dividends and buybacks.
Just like its bigger peer, Chevron Inc.(NYSE:CVX) shareholders voted on Wednesday against a resolution asking the company to adopt greenhouse gas emissions reductions targets, indicating support for the steps the company already has taken to address climate change.
Just 33% of shareholders voted in favor of the proposal, according to preliminary figures disclosed by the company, a sharp turnaround from last year when 61% of shareholders voted to support a similar proposal.
Meanwhile, Hess Corp. (NYSE: HES) has broken with the industry trend of returning excess cash flows to shareholders after announcing plans for massive capex spending in a bid to boost production. Hess has announced a 2022 capex budget of $2.6b; good for a 37% jump, with Bakken spend up 75% to $790m. In the Bakken, Hess plans to run three rigs to achieve its 168kb/d production target.
Changing Map
In yet another report published in the Geopolitical Intelligence Services blog , Carol Nakhle, CEO of Crystol Energy, says the consensus is that global oil consumption will peak within the next 20 years, but demand will not necessarily fall off a cliff thereafter.
Nakhle notes that in OECD countries, oil demand peaked in 2005 at around 50 million barrels per day. What has been driving the growth in global demand is the developing world, primarily Asia (mainly China and India – the second- and third-largest oil consumers in the world after the United States) and the Middle East (led by Saudi Arabia, which is also the sixth-largest consumer in the world). In fact, between 2009 and 2019, almost all the growth in global oil demand was driven by the developing world, with Asia expected to continue to be the growth center in the coming years. Non-OECD countries account for ~54% of global oil consumption.
Nakhle says, "…after peak oil demand is reached, it will at some point plateau and then shrink. In a growing market, there is space for everyone. In a shrinking market, for one country to increase production, supply from another country is squeezed out, usually done by price competition. In such a world, market power will shift toward consumers. Today they are desperately looking for oil; tomorrow they will be in a much stronger position."
She says that once global oil demand peaks and starts to fall, competition among producers to sell more oil and safeguard market share will intensify. In a stagnant or shrinking market, oil and gas producers will face new rules, very different from the ones they have been accustomed to. For instance, OPEC's strategy of cutting supplies to increase prices or Russia threatening to cut its supplies to keep sanctions off its oil exports will no longer be effective. To be fair, higher prices will attract additional production, as it always does. However, In a shrinking market, this will force prices lower, and any deliberate attempts to cut production to raise prices would simply backfire.
In the end, the consumer will end up holding most of the chips.
By Alex Kimani for Oilprice.com
Showing posts sorted by relevance for query PEAK OIL. Sort by date Show all posts
Showing posts sorted by relevance for query PEAK OIL. Sort by date Show all posts
Monday, June 06, 2022
Monday, October 03, 2022
The Biggest Argument For Peak Oil
Editor OilPrice.com
Sun, October 2, 2022
Editor OilPrice.com
Sun, October 2, 2022
It’s been two years since British oil and gas supermajor BP Plc. (NYSE: BP) dramatically declared that the world was already past Peak Oil demand. In the company’s 2020 Energy Outlook, chief executive Bernard Looney pledged that BP would increase its renewables spending twentyfold to $5 billion a year by 2030 and “... not enter any new countries for oil and gas exploration”.
That announcement came as a bit of a shocker given how aggressive BP has been in exploring new oil and gas frontiers.
When many analysts talk about Peak Oil, they are usually referring to that point in time when global oil demand enters a phase of terminal and irreversible decline. According to BP, this point has already come and gone, with oil demand slated to fall by at least 10% in the current decade and by as much as 50% over the next two. BP noted that historically, energy demand has risen steadily in tandem with global economic growth with few interruptions; however, the COVID-19 crisis and increased climate action might have permanently altered that playbook.
However, BP has been forced to do a mea culpa after it became clear that the COVID-19 pandemic that began more than two years ago has not resulted in a significant reduction in oil demand.
In its Energy Outlook 2022 edition, BP has revised down its forecast for global economic growth saying global GDP will only contract 1.5% by 2025 from 2019 levels compared to its earlier projection of a 2.5% contraction.
BP notes that its former grim outlook was drawn up prior to the Russian invasion of Ukraine-- another black swan event--which has driven global energy prices higher and cast an uncertain shadow over Russia’s oil and gas sector in recent months.
BP has predicted that oil demand will fall by 74% from 2021-2050, with global oil demand clocking in at a mere 24 million barrels per day by 2050. The International Energy Agency (IEA) has issued a similar forecast under a net-zero scenario though its trajectory of how the world will get there is different from BP’s. BP is, however, by no means the most bearish about global oil demand three decades out, with the Energy Watch Group predicting that oil demand will have virtually disappeared by that date.
Below is a table published by the Energy Intelligence Group that compares oil demand predictions by 28 organizations including a handful of Big Oil companies.
Oil Demand to 2050
(million b/d)
Peak
2030
2040
2050
2021-50
Energy Watch Group (0 Gt)
<2021
72
31
0
-100%
UNPRI 1.5 (2 Gt)
2025
88
46
20
-79
IEA Net-Zero (0 Gt)
<2021
72
43
24
-74
BP Net-Zero (2 Gt)
<2021
90
55
24
-74
UNPRI Forecast Policy (9 Gt)
2026
99
63
37
-61
IPCC 1.5°C Low Overshoot (1 Gt)
<2021
86
63
41
-56
Total Rupture
<2021
88
59
41
-56
Equinor Rebalance (9 Gt)
<2021
88
61
46
-51
BP Accelerated (10 Gt)
2025
96
72
47
-50
IPCC 1.5°C High Overshoot (6 Gt)
<2021
99
78
53
-44
DNV (19 Gt)
2024
85
69
49
-48
IEA Sustainable Development (8 Gt)
<2021
88
65
57
-39
Total Momentum
<2021
94
74
63
-33
IPCC 2°C (14 Gt)
2030
100
88
70
-26
IEA Announced Pledges (21 Gt)
2030
96
84
77
-18
BP New Momentum (31 Gt)
2030
101
92
81
-14
Equinor Reform (24 Gt)
2030
100
92
84
-11
Shell Sky 1.5 (18 Gt)
2025
100
94
85
-10
IPCC 2.5°C (29 Gt)
2040
105
107
99
+5
Shell Islands (34 Gt)
2040
102
104
102
+8
IEA Base (34 Gt)
2040
103
104
103
+9
IPCC 3°C (38 Gt)
2040
104
108
106
+13
Exxon
>2040
104
107
107
+14
Opec (34 Gt)
>2045
107
108
108
+15
Equinor Rivalry (32 Gt)
>2050
107
110
110
+17
IPCC 4°C (52 Gt)
2040
107
111
111
+18
Shell Waves (35 Gt)
2040
111
119
111
+18
US EIA (43 Gt)
>2050
109
117
126
+34%
Projected oil demand to 2030-50 in million barrels per day in a range of scenarios. When available, projected CO2 emissions in billion tons are shown in parenthesis (2021: 34 Gt). Source: BP, DNV, Equinor, EWG, Exxon Mobil, IEA, IPCC, Shell, TotalEnergies, UNPRI, US DOE
Source: Energy Intelligence Group
You will notice that no less than 10 organizations, including OPEC, Exxon Mobil (NYSE: XOM) and the Energy Information Administration (EIA), have predicted that global oil demand will actually grow as we go along and not shrink as most analysts have forecast.
Related: American Energy Bills Are Set To Soar This Winter
To be fair, it’s hard to be bullish about the long-term oil demand trend given that climate mandates are unlikely to ease, which coupled with the EV explosion as well as rapidly improving efficiency for gas-powered vehicles, are sure to limit oil consumption. Indeed, the Intergovernmental Panel on Climate Change's (IPCC) recently warned that keeping a 1.5ºC or even 2ºC warming limit in sight will require a big strengthening of current policies. In fact, Paris-compliant energy scenarios assume oil and gas demand will fall by respectively 40%-80% and 20%-60% between now and 2050 while gas demand needs to peak from 2025-2030.
Meanwhile, a plethora of innovations, such as gasoline direct fuel injection, turbocharged engines, automatic transmissions with more gear ratios, and stop/start systems that shut off the engine instead of allowing it to idle has improved fuel efficiency of new vehicles quite dramatically.
New U.S. cars now travel nearly twice as far per gallon as they did at the start of the Obama administration, while light trucks and SUVs have increased efficiency by a more modest 59%. About 26% of crude production is consumed by the transport sector.
EVs may pose an even bigger threat to the fossil fuel industry over the long run.
According to Bloomberg New Energy Finance( BNEF) electric and fuel cell vehicles are already subtracting about 1.7 million daily barrels from global consumption, but will displace a whopping 21 million barrels per day in oil demand by 2050. BNEF estimates that road fuel oil demand will peak in 2027, but it will take another decade for the impact of advancements to be materially felt. Emissions will almost halve by 2050, but the sector will still be nowhere near net-zero. In the best case scenario, by the 2050s, fossil-derived road fuel demand will fall below levels last seen in the early 1970s. In this case, oil-related emissions will drop to 3.4 gigatons CO2 by 2050, down from almost 6.5Gt in 2019.
Overall, oil demand might remain steady or even grow appreciably over the next couple of years, maybe through 2030. The long-term outlook, however, looks murkier, depending on whom you listen to.
By Alex Kimani for Oilprice.com
That announcement came as a bit of a shocker given how aggressive BP has been in exploring new oil and gas frontiers.
When many analysts talk about Peak Oil, they are usually referring to that point in time when global oil demand enters a phase of terminal and irreversible decline. According to BP, this point has already come and gone, with oil demand slated to fall by at least 10% in the current decade and by as much as 50% over the next two. BP noted that historically, energy demand has risen steadily in tandem with global economic growth with few interruptions; however, the COVID-19 crisis and increased climate action might have permanently altered that playbook.
However, BP has been forced to do a mea culpa after it became clear that the COVID-19 pandemic that began more than two years ago has not resulted in a significant reduction in oil demand.
In its Energy Outlook 2022 edition, BP has revised down its forecast for global economic growth saying global GDP will only contract 1.5% by 2025 from 2019 levels compared to its earlier projection of a 2.5% contraction.
BP notes that its former grim outlook was drawn up prior to the Russian invasion of Ukraine-- another black swan event--which has driven global energy prices higher and cast an uncertain shadow over Russia’s oil and gas sector in recent months.
BP has predicted that oil demand will fall by 74% from 2021-2050, with global oil demand clocking in at a mere 24 million barrels per day by 2050. The International Energy Agency (IEA) has issued a similar forecast under a net-zero scenario though its trajectory of how the world will get there is different from BP’s. BP is, however, by no means the most bearish about global oil demand three decades out, with the Energy Watch Group predicting that oil demand will have virtually disappeared by that date.
Below is a table published by the Energy Intelligence Group that compares oil demand predictions by 28 organizations including a handful of Big Oil companies.
Oil Demand to 2050
(million b/d)
Peak
2030
2040
2050
2021-50
Energy Watch Group (0 Gt)
<2021
72
31
0
-100%
UNPRI 1.5 (2 Gt)
2025
88
46
20
-79
IEA Net-Zero (0 Gt)
<2021
72
43
24
-74
BP Net-Zero (2 Gt)
<2021
90
55
24
-74
UNPRI Forecast Policy (9 Gt)
2026
99
63
37
-61
IPCC 1.5°C Low Overshoot (1 Gt)
<2021
86
63
41
-56
Total Rupture
<2021
88
59
41
-56
Equinor Rebalance (9 Gt)
<2021
88
61
46
-51
BP Accelerated (10 Gt)
2025
96
72
47
-50
IPCC 1.5°C High Overshoot (6 Gt)
<2021
99
78
53
-44
DNV (19 Gt)
2024
85
69
49
-48
IEA Sustainable Development (8 Gt)
<2021
88
65
57
-39
Total Momentum
<2021
94
74
63
-33
IPCC 2°C (14 Gt)
2030
100
88
70
-26
IEA Announced Pledges (21 Gt)
2030
96
84
77
-18
BP New Momentum (31 Gt)
2030
101
92
81
-14
Equinor Reform (24 Gt)
2030
100
92
84
-11
Shell Sky 1.5 (18 Gt)
2025
100
94
85
-10
IPCC 2.5°C (29 Gt)
2040
105
107
99
+5
Shell Islands (34 Gt)
2040
102
104
102
+8
IEA Base (34 Gt)
2040
103
104
103
+9
IPCC 3°C (38 Gt)
2040
104
108
106
+13
Exxon
>2040
104
107
107
+14
Opec (34 Gt)
>2045
107
108
108
+15
Equinor Rivalry (32 Gt)
>2050
107
110
110
+17
IPCC 4°C (52 Gt)
2040
107
111
111
+18
Shell Waves (35 Gt)
2040
111
119
111
+18
US EIA (43 Gt)
>2050
109
117
126
+34%
Projected oil demand to 2030-50 in million barrels per day in a range of scenarios. When available, projected CO2 emissions in billion tons are shown in parenthesis (2021: 34 Gt). Source: BP, DNV, Equinor, EWG, Exxon Mobil, IEA, IPCC, Shell, TotalEnergies, UNPRI, US DOE
Source: Energy Intelligence Group
You will notice that no less than 10 organizations, including OPEC, Exxon Mobil (NYSE: XOM) and the Energy Information Administration (EIA), have predicted that global oil demand will actually grow as we go along and not shrink as most analysts have forecast.
Related: American Energy Bills Are Set To Soar This Winter
To be fair, it’s hard to be bullish about the long-term oil demand trend given that climate mandates are unlikely to ease, which coupled with the EV explosion as well as rapidly improving efficiency for gas-powered vehicles, are sure to limit oil consumption. Indeed, the Intergovernmental Panel on Climate Change's (IPCC) recently warned that keeping a 1.5ºC or even 2ºC warming limit in sight will require a big strengthening of current policies. In fact, Paris-compliant energy scenarios assume oil and gas demand will fall by respectively 40%-80% and 20%-60% between now and 2050 while gas demand needs to peak from 2025-2030.
Meanwhile, a plethora of innovations, such as gasoline direct fuel injection, turbocharged engines, automatic transmissions with more gear ratios, and stop/start systems that shut off the engine instead of allowing it to idle has improved fuel efficiency of new vehicles quite dramatically.
New U.S. cars now travel nearly twice as far per gallon as they did at the start of the Obama administration, while light trucks and SUVs have increased efficiency by a more modest 59%. About 26% of crude production is consumed by the transport sector.
EVs may pose an even bigger threat to the fossil fuel industry over the long run.
According to Bloomberg New Energy Finance( BNEF) electric and fuel cell vehicles are already subtracting about 1.7 million daily barrels from global consumption, but will displace a whopping 21 million barrels per day in oil demand by 2050. BNEF estimates that road fuel oil demand will peak in 2027, but it will take another decade for the impact of advancements to be materially felt. Emissions will almost halve by 2050, but the sector will still be nowhere near net-zero. In the best case scenario, by the 2050s, fossil-derived road fuel demand will fall below levels last seen in the early 1970s. In this case, oil-related emissions will drop to 3.4 gigatons CO2 by 2050, down from almost 6.5Gt in 2019.
Overall, oil demand might remain steady or even grow appreciably over the next couple of years, maybe through 2030. The long-term outlook, however, looks murkier, depending on whom you listen to.
By Alex Kimani for Oilprice.com
Sunday, August 27, 2023
ECON 101
Oil Industry Not Spending Enough To Balance Supply & DemandSHARE BUY BACKS & DIVIDENDS
Editor OilPrice.com
Sat, August 26, 2023
Oil, Gas Companies Still Spending Less than Needed on New SupplyFailure to Invest: Oil & Gas Companies Still Underspending on New SupplyOil Industry is in Upcycle and Spending More, but Not EnoughOil Industry Not Spending Enough to Balance Supply & Demand
After years of warnings of failure to invest in enough new exploration, the industry has begun spending more. Yet, it would still be less than is necessary to secure enough supply to respond to demand.
That’s the take of Wood Mackenzie analysts, at least, who recently reported that the oil and gas industry is currently in the third year of an upcycle, with this year’s investments in new production at $490 billion. This would be significantly higher than the low reached in 2020, which stood at $370 billion.
Even though spending on its own is not enough to secure supply, the Wood Mac analysts noted in an interview for the firm that cost reductions will make up for the difference. They note the rise of U.S. shale and other non-OPEC sources, and forecast non-OPEC producers to maintain a constant market share in the coming years.
Indeed, this chimes in with what U.S. oil industry executives reported during the latest financial reporting season. What the said, basically, was that wells were yielding more oil than expected, boosting total production. The reason wells were yielding more: technological improvements.
Argus reported earlier this month, citing Pioneer Natural Resources, that well productivity since the start of the year has been trending significantly higher than the average for 2022. At the same time, however, Bloomberg recently cited research from Enverus suggesting that shale wells were draining faster than previously assumed, with few untapped reservoirs left as the shale patch gets mature.
Besides U.S. oil, there is also Canada, Mexico, Brazil, and smaller producers such as Guyana. These have contributed significantly to global supply, but OPEC remains the biggest fish in the oil pond because of its common supply control policies.
What’s more, with the expansion of the BRICS bloc, we get another grouping of some of the largest producers in the world, partly overlapping with OPEC but also including Brazil and Argentina.
Groupings aside, global investments in new oil and gas supplied are well and truly on a rise despite the transition push. Goldman Sachs reported last month that there were currently 70 large-scale oil and gas projects under development globally right now. That was up by a substantial 25% from 2020, although 2020 could hardly be seen as a normal year for investment decision-making in any industry except perhaps IT.
Per the investment bank, the seven-year-long underinvestment period led to a sharp decline in the resource life of future projects as well as the life of already producing fields. With a rebound in investment, this may yet change. Wood Mac, on the other hand, warns of peak demand and a fundamental change in the oil and gas industry driven by the prospect of that.
According to upstream analysts Fraser McKay and Ian Thom, the current cycle will not end with a bust as all previous cycles in the industry did. The reason: the prospect of peak oil demand caused by the transition to non-hydrocarbon energy sources. This prospect, they argued, would keep oil and gas producers on their toes and maintain their financial discipline over the longer term.
Still, despite the prospect of peak demand, even Wood Mac analysts are worried about the lack of a spare production capacity cushion, which could be viewed as a side effect of this newly found discipline with spending and focus on efficiency while adjusting to a world in transition.
“We expect companies to go for margin rather than market share; and upstream supply chain capacity to creep rather than leap, which has been the traditional response in an upcycle,” McKay and Thom said, adding “That restraint could lead to a tighter supply chain than the industry has been used to.”
While peak demand for oil is something that a lot of forecasters talk about and even call for openly, for now it remains on the horizon while actual demand for oil breaks record after record. Even the International Energy Agency, a vocal transition advocate and peak oil demand forecaster said that over the short-term demand is going to grow, hitting a record of over 102 million barrels daily this year.
This makes the global balance between supply and demand perhaps a bit more precarious than the Wood Mac analysis suggests. While it’s true that technological gains have played an important role in keeping production high while reducing costs, U.S. shale drillers have steered clear of their previous setting of “growth at all costs”.
Meanwhile, OPEC is keeping a lid on output with the novel option for individual members—Saudi Arabia—to cut additional volumes whenever they decide to, in order to push prices higher. And OPEC, in a sense, grew with the BRICS expansion.
The oil and gas industry is spending more on new production despite the transition push. This means expectations are that peak oil demand is a relatively distant prospect. It might even become more distant if the transition begins to show signs of exhaustion amid substantial cost inflation and the risks of raw material shortages.
By Irina Slav for Oilprice.com
Editor OilPrice.com
Sat, August 26, 2023
Oil, Gas Companies Still Spending Less than Needed on New SupplyFailure to Invest: Oil & Gas Companies Still Underspending on New SupplyOil Industry is in Upcycle and Spending More, but Not EnoughOil Industry Not Spending Enough to Balance Supply & Demand
After years of warnings of failure to invest in enough new exploration, the industry has begun spending more. Yet, it would still be less than is necessary to secure enough supply to respond to demand.
That’s the take of Wood Mackenzie analysts, at least, who recently reported that the oil and gas industry is currently in the third year of an upcycle, with this year’s investments in new production at $490 billion. This would be significantly higher than the low reached in 2020, which stood at $370 billion.
Even though spending on its own is not enough to secure supply, the Wood Mac analysts noted in an interview for the firm that cost reductions will make up for the difference. They note the rise of U.S. shale and other non-OPEC sources, and forecast non-OPEC producers to maintain a constant market share in the coming years.
Indeed, this chimes in with what U.S. oil industry executives reported during the latest financial reporting season. What the said, basically, was that wells were yielding more oil than expected, boosting total production. The reason wells were yielding more: technological improvements.
Argus reported earlier this month, citing Pioneer Natural Resources, that well productivity since the start of the year has been trending significantly higher than the average for 2022. At the same time, however, Bloomberg recently cited research from Enverus suggesting that shale wells were draining faster than previously assumed, with few untapped reservoirs left as the shale patch gets mature.
Besides U.S. oil, there is also Canada, Mexico, Brazil, and smaller producers such as Guyana. These have contributed significantly to global supply, but OPEC remains the biggest fish in the oil pond because of its common supply control policies.
What’s more, with the expansion of the BRICS bloc, we get another grouping of some of the largest producers in the world, partly overlapping with OPEC but also including Brazil and Argentina.
Groupings aside, global investments in new oil and gas supplied are well and truly on a rise despite the transition push. Goldman Sachs reported last month that there were currently 70 large-scale oil and gas projects under development globally right now. That was up by a substantial 25% from 2020, although 2020 could hardly be seen as a normal year for investment decision-making in any industry except perhaps IT.
Per the investment bank, the seven-year-long underinvestment period led to a sharp decline in the resource life of future projects as well as the life of already producing fields. With a rebound in investment, this may yet change. Wood Mac, on the other hand, warns of peak demand and a fundamental change in the oil and gas industry driven by the prospect of that.
According to upstream analysts Fraser McKay and Ian Thom, the current cycle will not end with a bust as all previous cycles in the industry did. The reason: the prospect of peak oil demand caused by the transition to non-hydrocarbon energy sources. This prospect, they argued, would keep oil and gas producers on their toes and maintain their financial discipline over the longer term.
Still, despite the prospect of peak demand, even Wood Mac analysts are worried about the lack of a spare production capacity cushion, which could be viewed as a side effect of this newly found discipline with spending and focus on efficiency while adjusting to a world in transition.
“We expect companies to go for margin rather than market share; and upstream supply chain capacity to creep rather than leap, which has been the traditional response in an upcycle,” McKay and Thom said, adding “That restraint could lead to a tighter supply chain than the industry has been used to.”
While peak demand for oil is something that a lot of forecasters talk about and even call for openly, for now it remains on the horizon while actual demand for oil breaks record after record. Even the International Energy Agency, a vocal transition advocate and peak oil demand forecaster said that over the short-term demand is going to grow, hitting a record of over 102 million barrels daily this year.
This makes the global balance between supply and demand perhaps a bit more precarious than the Wood Mac analysis suggests. While it’s true that technological gains have played an important role in keeping production high while reducing costs, U.S. shale drillers have steered clear of their previous setting of “growth at all costs”.
Meanwhile, OPEC is keeping a lid on output with the novel option for individual members—Saudi Arabia—to cut additional volumes whenever they decide to, in order to push prices higher. And OPEC, in a sense, grew with the BRICS expansion.
The oil and gas industry is spending more on new production despite the transition push. This means expectations are that peak oil demand is a relatively distant prospect. It might even become more distant if the transition begins to show signs of exhaustion amid substantial cost inflation and the risks of raw material shortages.
By Irina Slav for Oilprice.com
Saturday, May 20, 2006
Canada Reaches Peak Oil In 2020
Behind the rosy glasses and good news, tinkling of champagne glasses, report of the Canadian Association of Petroleum Producers, touting the increased growth in the Tar Sands oil production, there lies the ominous Peak Oil prediction. Yep peak oil will begin in Alberta in 2020, about the time that Hubbert predicted. " production from conventional oil wells will decline by half by 2020, to only 550,000 barrels a day, CAPP predicts."
And Alberta is not the only region in Canada facing a decline in conventional gas and oil production. Canada's newest oil supply source, offshore production on the Grand Banks of Newfoundland, is forecast to peak at 320,000 barrels per day in 2010 then sink by 50 per cent to 160,000 barrels daily in 2020. Slow exploration, poor drilling luck, forbidding environmental conditions and political disputes over resource ownership and revenues are expected to stall development.
So while CAPP predicts Tar Sands production will replace conventional production, that still does not mean that Peak Oil conditions will be allievated in 2020. Rather they are betting that Tar Sands production will meet world demand, however they fail to consider that their predictions are based on current world demand, not on the inevitable; increasing demand. And again they gloss over the more serious issue, our conventional oil and gas reserves are on decline. Period.
Find blog posts, photos, events and more off-site about:
Oil, gas, production, Peak-Oil, Hubbert, Alberta, Canada, Newfoundland, CAPP, Tar-sands, 2020
And Alberta is not the only region in Canada facing a decline in conventional gas and oil production. Canada's newest oil supply source, offshore production on the Grand Banks of Newfoundland, is forecast to peak at 320,000 barrels per day in 2010 then sink by 50 per cent to 160,000 barrels daily in 2020. Slow exploration, poor drilling luck, forbidding environmental conditions and political disputes over resource ownership and revenues are expected to stall development.
So while CAPP predicts Tar Sands production will replace conventional production, that still does not mean that Peak Oil conditions will be allievated in 2020. Rather they are betting that Tar Sands production will meet world demand, however they fail to consider that their predictions are based on current world demand, not on the inevitable; increasing demand. And again they gloss over the more serious issue, our conventional oil and gas reserves are on decline. Period.
Find blog posts, photos, events and more off-site about:
Oil, gas, production, Peak-Oil, Hubbert, Alberta, Canada, Newfoundland, CAPP, Tar-sands, 2020
Monday, January 23, 2006
China Challenges US over Saudi Oil
The number two oil economy in the World, China, is challenging American hegemony over the oil fields in the Middle East. This will surely push peak oil in both the short and long term. By developing trade partnerships with oil producing countries like Saudi Arabia, China can avoid American interfence in its importing oil, since the Saudi's can claim its just a business deal.
peak oil
China
Saudi Arabia
Middle East
China, the world's second biggest oil consumer, has been aggressively seeking to strengthen relationships with major oil suppliers as it grows increasingly reliant on oil imports. Saudi Arabia accounts for about 17% of China's imported oil.Total trade between the two countries - much of it Saudi oil bought by China - grew by 59% in the first 11 months of 2005 to $14 billion, according to China's Foreign Ministry. Some observers believe that the Chinese need for new oil supplies could lead to a stand-off with the United States over access to Middle Eastern oil. King to sign Saudi-China oil deals
The End of the Oil Age
US Government Discovers Peak Oil
Tags
peak oil
China
Saudi Arabia
Middle East
Saturday, March 23, 2024
Big Oil Grows Bolder in Transition Pushback
- Several big oil executives at this CERA-week are openly calling for a rethink of the transition and caution in the rush to give up oil and gas.
- Executives at CERAWeek are now openly warning against moving too quickly and applying some caution in the desired switch from oil and gas to full electrification.
- Aramco's Amin Nasser was especially blunt, saying, "We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately,".
Until recently, large oil companies tended to stay quiet when governments and activists urged them to accelerate the transition from their products to alternative energy sources. Now, this is changing. And it is changing radically.
At this week's CERAWeek conference in Houston, this change was especially visible, with several top executives openly calling for a rethink of the transition and caution in the rush to give up oil and gas—which is unlikely to happen anytime soon.
Unsurprisingly, Aramco's Amin Nasser was especially blunt, saying, "We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately," as quoted by Reuters. Nasser added that wind and solar are yet to prove themselves as adequate replacements for oil and gas in terms of cost.
Nasser was not pulling any punches, pointing out that oil demand, whose demise has been predicted repeatedly, was going to once again hit a record this year despite those predictions. Indeed, the International Energy Agency, the most prominent outlet making the demise predictions, has now regularly had to revise its oil demand forecasts almost every month in the past couple of years.
It seems that oil demand may continue to grow at a similar pace in the coming years as well. In fact, another oil executive just warned that energy demand globally is set to increase faster than population growth, meaning that oil demand is nowhere near peaking by 2030.
"The world population is going to increase by about 25% between now and 2050, but energy demand will increase faster than that," Sheikh Nawaf al-Sabah, the chief executive of Kuwait Petroleum Corporation, said at CERAWeek, as quoted by CNBC. He was responding to a question about the IEA's peak oil demand prediction.Related: Oil Supported By Crude, Gasoline Draws
Al-Sabah added that "The global south will be a large component of energy demand in the future. And it's only fair to have countries that have – to use a term – energy poverty, be able to exploit natural resources in a clean and efficient manner."
The comment echoes statements made by African leaders who have slammed the West for preventing their countries from exploiting their energy resources by withholding finance from international lenders such as the IMF and the World Bank.
Private banks in Europe and North America are also reluctant to finance oil and gas projects in Africa, but they are leaving no vacuum. Chinese lenders are happily stepping in to fund oil and gas production in African countries.
The African resource question seems like one that is going to continue garnering growing attention. Africa contains much of the untapped oil and gas resources of the world, and it is difficult to argue with the claim that the West has no moral right to insist African countries skip the oil and gas phase to move straight to wind and solar, which are incompatible with industrialization.
So is the opposition to a rushed transition. Executives at CERAWeek are now openly warning against moving too quickly and applying some caution in the desired switch from oil and gas to full electrification.
A very on-point comment came from Woodside Energy's Meg O'Neill, who said, as quoted by Reuters, that "It has become emotional. And when things are emotional, it becomes more difficult to have a pragmatic conversation."
Indeed, there is a lot of emotion in transition conversations, and this has not been productive. It was because of this focus on emotions—fear of an apocalyptic future around the corner—that some major problems with wind and solar remained overlooked for quite a long time, only emerging recently to haunt the industries.
Take wind's stock market crisis from last year as it emerged that wind energy is not exactly as cheap as advertised and that it cannot be as cheap as advertised because developers won't make any money from it. Then there was the slowing uptake of solar as some governments began to phase out subsidies, suggesting that it, too, was probably not quite as cheap as advertised.
Naturally, none of these statements will be taken seriously by politicians who have declared their complete support for the transition. U.S. Energy Secretary Jennifer Granholm's reaction to the above statements was a good illustration.
"That is one opinion," Granholm said in comments on Aramco's of Nasser's forecast for oil demand. "There have been other studies that suggest the opposite that oil and gas demand and fossil demand will peak by 2030.
Those other studies are the IEA report that Nasser referred to originally, pointing out the prediction of peak demand focused on Western nations while the big driver of additional demand will be the developing world.
Even for Western nations, however, it is difficult to imagine peak oil demand in less than ten years. The average per-capital consumption of oil in the U.S. is 22 barrels annually, versus less than 2 barrels annually for developing countries. Giving up such energy abundance would be quite difficult—and wind, solar, and EVs cannot provide it.
By Irina Slav for Oilprice.com
Thursday, April 18, 2024
Standard Chartered Says Peak Oil Demand Is Not Imminent
- Whereas the short-term oil price outlook appears murky, leading oil agencies remain largely bullish about the long-term outlook.
- Interestingly, over the medium-and long-term, only the IEA sees global oil demand peaking before 2030.
- Standard Chartered has predicted global oil demand will hit 110.2 mb/d in 2030 and increase further to 113.5 mb/d in 2035.
The oil price rally has lately lost some steam, with WTI for May delivery and June Brent futures slipping more than 5% since Friday after the Energy Information Administration (EIA) released bearish weekly data that triggered demand concerns. According to the EIA, crude inventories rose 5.84 mb w/w and oil product inventories rose 6.57 mb; however, the builds relative to the five-year average were modest, at just 0.11mb for crude oil and 1.24mb for products. U.S. commercial inventories now stand 16.47mb below the five-year average, with crude inventories at Cushing 7.35 mb below the five-year average. The EIA also estimates U.S. crude oil output clocked in at 13.1 mb/d for a fifth consecutive week, 0.8 mb/d higher y/y but 0.2 mb/d lower than December 2023 production.
Whereas the short-term oil price outlook appears murky, leading oil agencies remain largely bullish about the long-term outlook. Last week, the International Energy Agency (IEA) published its latest monthly Oil Market Report (OMR), including its first detailed 2025 forecast. The Paris-based energy watchdog predicted that global oil demand in 2025 demand will be 1.147 mb/d higher than 2024 levels, higher than the 1.0 mb/d estimate it had released in June 2023. Other leading agencies have predicted even higher demand growth in 2025: the EIA forecast is 1.351 mb/d, Standard Chartered’s forecast is 1.444 mb/d while the OPEC Secretariat has predicted a 1.847 mb/d increase in demand.Related: World Oil Demand Jumped To 5-Year Seasonal High in February
Interestingly, over the medium-and long-term, only the IEA sees global oil demand peaking before 2030, even in its most optimistic forecast (high growth). However, the IEA says an oil demand peak doesn't necessarily mean a rapid plunge in fossil fuel consumption is imminent, adding that it will probably be followed by “an undulating plateau lasting for many years.”
The EIA is the most bullish on long-term oil demand, and has predicted a demand peak will come in 2050 while the OPEC Secretariat sees it coming five years earlier. Meanwhile, Standard Chartered has predicted global oil demand will hit 110.2 mb/d in 2030 and increase further to 113.5 mb/d in 2035. However, the commodity experts have not projected a demand peak beyond the end of their modeling horizon in 2035. According to StanChart, a structural long-term peak is very unlikely within 10 years despite a high probability of cyclical downturns over the period. StanChart has argued that the current gulf between demand views creates significant investment uncertainty which that’s likely to force longer-term prices higher.
In other words, the energy agencies appear to agree that an oil demand peak is nowhere on the horizon.
Source: Standard Chartered Research
Traders Still Betting On The Energy Sector
The energy sector has been a standout performer in the current year, managing a 15.8% return in the year-to-date, the second highest amongst 11 U.S. market sectors. However, the sector has slipped nearly 5% over the past week with Wall Street experts warning that oil prices sit in a precarious position, which could lead to price swings as geopolitical tensions continue to escalate all throughout the Middle East.
Thankfully, traders are still betting on the energy sector.
Last week, U.S. fund assets (exchange-traded funds and conventional funds) recorded $29.7B in net outflows--in large part to money market funds--marking the third week in four that money flowed from the space. Money market funds recorded $35.3B in net outflows, equity funds lost $1B, commodities funds gave back $207M, and mixed-assets funds observed outflows of $168M.
Interestingly, two funds that recorded the most significant amount of capital inflows on the week were the Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP) at $2.8B and the Energy Select Sector SPDR Fund (NYSEARCA:XLE) at $756M.
Oil and gas stocks also remain among the least shorted. Last month, average short interest across energy stocks in the S&P 500 index increased 14 basis points to 2.56% of shares floating at the end of the month. APA Corp. (NYSE:APA) was the most-shorted energy stock, with 22.1 million shares sold short as of March 31, or just 5.98% of the shares float. EQT (NYSE:EQT) was the second most shorted energy stock at 5.85% of shares float, while Occidental Petroleum (NYSE:OXY) and Valero (NYSE:VLO) were in third and fourth place with 5.58% and 3.35%, of their floats sold short, respectively
In comparison, medical services company IMAC Holdings Inc. is the most shorted stock in the S&P 500 with nearly 95% of its float sold short.
By Alex Kimani for Oilprice.com
Thursday, June 08, 2006
Peak Oil: France and Canada Agree
Coincidence ? I think not.
We will hit Peak Oil in 14 years. Are ye prepared?!
A tip o the blog to John Murney
Also See:
Peak Oil,
Technocracy
Find blog posts, photos, events and more off-site about:
Oil, gas, production, Peak-Oil, Hubbert, Alberta, Canada, Newfoundland, CAPP, Tar-sands, 2020
France, Total,
Total sees 2020 oil output peak, urges less demand
Wed Jun 7, 2006 7:48am ET
- France's Total estimates global oil production will peak around 2020 if output growth continues at current levels and has advised governments to cool demand to avoid a supply crunch, its chief executive said. "The capacity of raising (oil) production is a real challenge ... if we stay with this type of production growth our impression is that peak production could be reached around 2020," Thierry Desmarest told the World Gas Conference in Amsterdam on Wednesday.Canada Reaches Peak Oil In 2020 Saturday, May 20, 2006
We will hit Peak Oil in 14 years. Are ye prepared?!
A tip o the blog to John Murney
Also See:
Peak Oil,
Technocracy
Find blog posts, photos, events and more off-site about:
Oil, gas, production, Peak-Oil, Hubbert, Alberta, Canada, Newfoundland, CAPP, Tar-sands, 2020
France, Total,
Sunday, July 05, 2020
Big Oil confronts possibility of terminal demand decline
Issued on: 05/07/2020 -
Paris (AFP)
Although crude prices have rebounded from coronavirus crisis lows, oil execs and experts are starting to ask if the industry has crossed the Rubicon of peak demand.
The plunge in the price of crude oil during the first wave of coronavirus lockdowns -- futures prices briefly turned negative -- was due to the drop in global demand as planes were parked on tarmacs and cars in garages.
The International Energy Agency (IEA) forecast that average daily oil demand will drop by eight million barrels per day this year, a decline of around eight percent from last year.
While the agency expects an unprecedented rebound of 5.7 million barrels per day next year, it still forecasts overall demand will be lower than in 2019 owing to ongoing uncertainty in the airline sector.
Some are questioning whether demand will ever get back to 2019 levels.
"I don't think we know how this is going to play out. I certainly don't know," BP's new chief executive Bernard Looney said in May.
The COVID-19 pandemic was in full swing then with most planes grounded and white-collar workers giving up the commute to work from home.
"Could it be peak oil? Possibly. I would not write that off," Looney told the Financial Times.
- Summited? -
The concept of peak oil has long generated speculation.
Mostly, it has been focused on peak production, with experts forecasting that prices would reach astronomical levels as recoverable oil in the ground runs out.
But in recent months, the concept of peak demand has come into vogue, with the coronavirus landing an uppercut into fuel demand for the transportation sector followed by a knock-out punch from the transition to cleaner fuels.
Michael Bradshaw, professor at Warwick Business School, said environmental groups are already lobbying to prevent the Paris agreements becoming another casualty of the pandemic, stressing the need for a Green New Deal for the recovery.
"If they are successful, demand for oil might never return to the peak we saw prior to COVID-19," he said in comments to journalists.
The transport sector may never fully recover, Bradshaw posited.
"After the pandemic, we might have a different attitude to international air travel or physically going into work," he said.
- 'Science fiction' -
Other experts say we haven't reached the tipping point yet, and might not for a while.
"Many people have said, including some CEOs of some major companies, with the lifestyle changes now to teleworking and others we may well see oil demand has peaked, and oil demand will go down," IEA executive director Fatih Birol said recently.
"I don't agree with that. Teleconferencing alone will not help us to reach our energy and climate goals, they can only make a small dent," Firol added while unveiling a recent IEA report.
Moez Ajmi at consulting and auditing firm E&Y dismissed as "science fiction" the idea that a definitive drop in oil demand could suddenly emerge.
He expects a slow recovery in demand even if the coronavirus leaves the global economy weakened.
That weakness would also likely slow adoption of greener fuels.
"It will take time for fossil fuels, which today still account for some 80 percent of primary global consumption to face real competition" from rival energy sources, he said.
Meanwhile, the oil industry could face financing challenges.
Bronwen Tucker, an analyst at Oil Change International, says the industry is now under pressure from investors.
After "a pretty big wave of restrictions on coal and some restrictions on oil and gas, the risks to oil and gas investment right now feel a lot more salient," she said.
The industry is already writing down the value of assets to face up to the new market reality of lower demand and prices.
Royal Dutch Shell said this past week that it will take a $22 billion charge as it re-evaluates the value of its business in light of the coronavirus.
Last month, rival BP reduced the worth of its assets by $17.5 billion.
"This process has further to run, and we expect further large impairments to occur across the sector," said Angus Rodger of specialist energy consultancy Wood Mackenzie.
© 2020 AFP
Issued on: 05/07/2020 -
Is this the sunset of the oil industry? Paul Ratje AFP
Paris (AFP)
Although crude prices have rebounded from coronavirus crisis lows, oil execs and experts are starting to ask if the industry has crossed the Rubicon of peak demand.
The plunge in the price of crude oil during the first wave of coronavirus lockdowns -- futures prices briefly turned negative -- was due to the drop in global demand as planes were parked on tarmacs and cars in garages.
The International Energy Agency (IEA) forecast that average daily oil demand will drop by eight million barrels per day this year, a decline of around eight percent from last year.
While the agency expects an unprecedented rebound of 5.7 million barrels per day next year, it still forecasts overall demand will be lower than in 2019 owing to ongoing uncertainty in the airline sector.
Some are questioning whether demand will ever get back to 2019 levels.
"I don't think we know how this is going to play out. I certainly don't know," BP's new chief executive Bernard Looney said in May.
The COVID-19 pandemic was in full swing then with most planes grounded and white-collar workers giving up the commute to work from home.
"Could it be peak oil? Possibly. I would not write that off," Looney told the Financial Times.
- Summited? -
The concept of peak oil has long generated speculation.
Mostly, it has been focused on peak production, with experts forecasting that prices would reach astronomical levels as recoverable oil in the ground runs out.
But in recent months, the concept of peak demand has come into vogue, with the coronavirus landing an uppercut into fuel demand for the transportation sector followed by a knock-out punch from the transition to cleaner fuels.
Michael Bradshaw, professor at Warwick Business School, said environmental groups are already lobbying to prevent the Paris agreements becoming another casualty of the pandemic, stressing the need for a Green New Deal for the recovery.
"If they are successful, demand for oil might never return to the peak we saw prior to COVID-19," he said in comments to journalists.
The transport sector may never fully recover, Bradshaw posited.
"After the pandemic, we might have a different attitude to international air travel or physically going into work," he said.
- 'Science fiction' -
Other experts say we haven't reached the tipping point yet, and might not for a while.
"Many people have said, including some CEOs of some major companies, with the lifestyle changes now to teleworking and others we may well see oil demand has peaked, and oil demand will go down," IEA executive director Fatih Birol said recently.
"I don't agree with that. Teleconferencing alone will not help us to reach our energy and climate goals, they can only make a small dent," Firol added while unveiling a recent IEA report.
Moez Ajmi at consulting and auditing firm E&Y dismissed as "science fiction" the idea that a definitive drop in oil demand could suddenly emerge.
He expects a slow recovery in demand even if the coronavirus leaves the global economy weakened.
That weakness would also likely slow adoption of greener fuels.
"It will take time for fossil fuels, which today still account for some 80 percent of primary global consumption to face real competition" from rival energy sources, he said.
Meanwhile, the oil industry could face financing challenges.
Bronwen Tucker, an analyst at Oil Change International, says the industry is now under pressure from investors.
After "a pretty big wave of restrictions on coal and some restrictions on oil and gas, the risks to oil and gas investment right now feel a lot more salient," she said.
The industry is already writing down the value of assets to face up to the new market reality of lower demand and prices.
Royal Dutch Shell said this past week that it will take a $22 billion charge as it re-evaluates the value of its business in light of the coronavirus.
Last month, rival BP reduced the worth of its assets by $17.5 billion.
"This process has further to run, and we expect further large impairments to occur across the sector," said Angus Rodger of specialist energy consultancy Wood Mackenzie.
© 2020 AFP
Thursday, June 15, 2023
DEJA VU
RELATED Renewables gaining ground, but gas dominates the U.S. energy grid
For just solar power, investments are on pace to overtake capital spending on oil production for the first time.
The rest of that, some $1 trillion, will go toward more traditional forms of energy, such as coal and crude oil.
Despite his comments Wednesday in the IEA's monthly oil report, Birol has a long track record of vocal support for alternative energy, particularly electric vehicles.
The IEA said more than 10 million electric vehicles were sold last year, and sales are expected to reach 14 million in 2023 -- a pace the agency described as "explosive."
Cars, meanwhile, are just the "first wave," with buses and long-haul trucks expected to follow recent trends.
Birol said in April that EVs are ushering in a historic transformation not only for the global energy landscape, but for the auto manufacturing sector worldwide.
RELATED IEA: CO2 emissions up 0.9% as fossil fuels hinder climate goals
With the IEA predicting something of a sea change in global energy markets, Birol offered a stark warning to energy companies.
"Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition," he said Wednesday.
International Energy Agency says peak oil demand in sight by end of decade
With advances in renewable and alternative forms of energy, the International Energy Agency sees peak demand for fossil fuels emerging before the end of the decade.
With advances in renewable and alternative forms of energy, the International Energy Agency sees peak demand for fossil fuels emerging before the end of the decade.
File photo by Pat Benic/ UPI | License Photo
June 14 (UPI) -- Shifts in renewable and alternative forms of energy suggest global crude oil demand will peak by the end of the decade, the Paris-based International Energy Agency said Wednesday.
The IEA expects oil demand will "slow almost to a halt" in the years ahead as the so-called energy transition -- the pivot away from fossil fuels -- accelerates.
"The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance," IEA executive director Fatih Birol said.
With an expected move away from crude oil, the IEA estimated that $2.8 trillion will be invested globally in the energy sector this year, with around $1.7 trillion of that going to cleaner technologies such as nuclear power, renewable energy and electric vehicles.
June 14 (UPI) -- Shifts in renewable and alternative forms of energy suggest global crude oil demand will peak by the end of the decade, the Paris-based International Energy Agency said Wednesday.
The IEA expects oil demand will "slow almost to a halt" in the years ahead as the so-called energy transition -- the pivot away from fossil fuels -- accelerates.
"The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance," IEA executive director Fatih Birol said.
With an expected move away from crude oil, the IEA estimated that $2.8 trillion will be invested globally in the energy sector this year, with around $1.7 trillion of that going to cleaner technologies such as nuclear power, renewable energy and electric vehicles.
RELATED Renewables gaining ground, but gas dominates the U.S. energy grid
For just solar power, investments are on pace to overtake capital spending on oil production for the first time.
The rest of that, some $1 trillion, will go toward more traditional forms of energy, such as coal and crude oil.
Despite his comments Wednesday in the IEA's monthly oil report, Birol has a long track record of vocal support for alternative energy, particularly electric vehicles.
The IEA said more than 10 million electric vehicles were sold last year, and sales are expected to reach 14 million in 2023 -- a pace the agency described as "explosive."
Cars, meanwhile, are just the "first wave," with buses and long-haul trucks expected to follow recent trends.
Birol said in April that EVs are ushering in a historic transformation not only for the global energy landscape, but for the auto manufacturing sector worldwide.
RELATED IEA: CO2 emissions up 0.9% as fossil fuels hinder climate goals
With the IEA predicting something of a sea change in global energy markets, Birol offered a stark warning to energy companies.
"Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition," he said Wednesday.
Monday, January 07, 2008
Still not getting our due
The market wonks and pundits are all a flutter about $100 oil. It hit that price last week in two, count em two, speculative deals amongst hundreds in the commodity markets. The price then dropped to between 97 and 99 dollars. This was declared a decline, with much brow wiping.
However the price of oil before last week was $95 at the end of 2007. Again a fact that seemed to be glossed over in the news about hundred buck oil. It hovered between $72 and $80 for most of last year. Then is shot up at the end of the year. Thanks to speculation not real market conditions of supply and demand. Today it is now in the high nineties.
Oil prices rose at a record rate last year a 60% hike . And they will continue to go up. It is one of the conditions of a Peak Oil marketplace.
Which means that Albertans are still getting short changed on our royalties. Since Stelmach's Royalty regime will not come into effect until 2009 and as an uncensored Alberta Energy Report reveals we have been short changed even under the existing royalty scheme.
Oil prices in 2007 rose 57% and wholesale gasoline prices climbed at a similar rate
Oil prices breached a record $100 a barrel several times last week, as falling inventories, geopolitical tensions, strong demand from developing countries and a weak dollar pushed futures above the psychologically important mark.
David Pumphrey Deputy Director, Energy, Center for Strategic and International Studies
"Fundamentals are still quite strong, and would support oil prices in the $90 to $100 range, but not much higher. The wild card is the financial markets."
Daniel Yergin Chairman of Cambridge Energy Research Associates
"Prices won't hover around $100 unless some bad things happen in oil-producing countries. Last year, oil averaged $72
Oil, gas price forecasts
Raymond James analysts are predicting that crude prices will again exceed Wall Street's consensus in 2008. "The global oil markets must push oil prices high enough to slow global oil demand growth in a supply-constrained market," they said. Accordingly, Raymond James raised its forecast of crude prices to an average $90/bbl in 2008, up from a previous estimate of $80/bbl "to reflect a tightening, supply-constrained oil market." Analysts said, "Additionally, we are raising our 2009 forecast from $85/bbl to $100/bbl due to our belief that additional oil supplies will be even harder to find in 2009 and beyond."Raymond James analysts noted continued strong growth in domestic gas production—"primarily Barnett shale and Rockies driven"—and increased LNG imports should again push US gas storage levels to record highs in 2008. Therefore, they said, "We believe 2008 gas prices will be even weaker than originally anticipated and are revising our 2008 US gas price forecast down from $7/Mcf to an average of $6.50/Mcf for the full year, the lowest since 2004. We are also initiating a 2009 price forecast of $7/Mcf. While US gas prices could remain relatively weak through 2009, the build-out of global gas infrastructure should eventually drive global gas prices closer to BTU parity (6:1 price ratio) over the next 5 years."
Censored report shows gov't was told in 2006 Alta. missing out on oil billions
EDMONTON - Alberta Energy told the provincial government in 2004 that the province was missing out on billions of dollars in resource revenue, newly released documents show.
In a 2006 report, the department estimated that since royalty rates were capped at certain price levels, Alberta had lost between $1.3 billion and $2.8 billion in "uncaptured economic rent" for natural gas alone in 2003 and 2004, or between $700 million and $1.4 billion a year.
The department's cross-commodity resource valuation team called on the government to "increase conventional oil and gas royalties to restore Alberta's fair share at high prices."
Another section of the report, comparing Alberta with eight U.S. oil-producing states, showed the province ranked lowest in the percentage it took in royalties and taxes.
Premier Ed Stelmach announced last fall that he was hiking royalties, but not until 2009 and not to the extent called for by the royalty review panel headed by Bill Hunter.
In the documents, information about oilpatch returns against reinvestment between 1990 and 2003 show that despite higher returns for companies and record drilling, the ratio of reinvestment has declined. The words "higher returns, record drilling, declining reinvestment" were stricken from documents previously released to The Journal.Alberta's NDP joined in the fray Friday by attacking Stelmach's new royalty framework as a massive giveaway to oil companies.
"When oil hits $100, this new royalty framework will forgo tens of millions of dollars a day compared to Alaska," NDP Leader Brian Mason said.
"When the time comes that oil regularly trades at $100, the Tory royalty system will cost Albertans over $4 billion a year."
Stelmach's oil royalty plan called inferior to Alaska's
Premier Ed Stelmach's new oil royalty revenue scheme will generate chump change compared to the system used in Alaska, says Alberta NDP leader Brian Mason.
"The two areas face similar challenges in terms of costly operations to extract crude oil and have similar right-leaning governments, yet Alaska has managed to come up with a system that generates far more money from oil than we ever could under the new royalty regime," he said yesterday.
By Mason's math, Albertans are foregoing $4.3 billion in extra oil revenue by not charging higher royalty percentages and capitalizing on $100 per barrel oil prices.
Mason said under the new royalty regime, Alberta will take in $7.4 billion, but that could jump to $11.8 billion if Alberta took a bigger piece of the pie.
"Alaska takes $42.24 on each barrel of $100 oil and the sky didn't fall as Big Oil warned us it would in Alberta just a few months ago.
"Alberta takes just $26.51 from a barrel of $100 oil. There is a huge gap there and a lot of room for us to earn more money. The price of a barrel of oil isn't going down much any time soon. As far as I can tell, the world only has so much of it to go around."
SEE
The Economist On Alberta's Fair Share
Find blog posts, photos, events and more off-site about:
$100 oil, Alberta, tarsands, oilsands, Canada, peak oil, royalties, oil, profits, Province, Bill Hunter, Alberta Royalty Review,
Alberta Cabinet, CAPP, Ed Stelmach,
Big Oil,oil royalties,
Subscribe to:
Posts (Atom)