The Big Pic­ture

All signs point to oil’s growth—but there may be de­tours along the way

Alberta Oil - - CONTENTS -

All signs point to oil’s growth—but there still may be de­tours along the way


Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries rarely agree on much. But re­cently they’ve found mid­dle ground on these two points: Oil de­mand will not peak in the near fu­ture and the elec­tric car will not be the down­fall of the fos­sil fuel busi­ness.

“Oil de­mand growth is not com­ing from cars—it’s from trucks, avi­a­tion and the petro­chem­i­cal in­dus­try and we don’t have ma­jor al­ter­na­tives to oil prod­ucts there,” said IEA ex­ec­u­tive direc­tor Fatih Birol at a Novem­ber en­ergy con­fer­ence in Paris. “I don’t buy the ar­gu­ment that elec­tric cars alone will cause a peak in oil de­mand at least in the short and medium term.”

The IEA chief’s state­ment came just days af­ter OPEC re­leased its global oil mar­ket re­port which pre­dicted that peak oil de­mand could be reached by 2029 if the pro­vi­sions of the re­cently rat­i­fied Paris cli­mate deal are put into full force by all sig­na­tory na­tions. That was OPEC’s sec­ondary sce­nario out­lined in its 25-year fore­cast. The pri­mary sce­nario still saw coun­tries pur­sue the emis­sions curbs of the Paris agree­ment, but less ag­gres­sively, par­tic­u­larly among those poorer na­tions whose par­tic­i­pa­tion is de­pen­dent on out­side fi­nan­cial sup­port. That out­look sees oil de­mand ris­ing un­til at least 2040, when the fore­cast ends.

Of course, the Paris agree­ment is non-bind­ing, and the first round of pledges re­quired noth­ing more than a sig­na­ture to ful­fill its con­tri­bu­tions. As time goes on, how­ever, any coun­try ad­her­ing to the strict let­ter of the agree­ment will have to ramp up its cuts on emis­sions ev­ery five years or so. The idea that all of the suc­ces­sive gov­ern­ments of sig­na­tory na­tions will be will­ing or able to achieve this be­tween now and when global emis­sions are even­tu­ally cut is al­most un­think­able.

In the mean­time, the IEA pre­dicts global oil de­mand will rise by 1.2 mil­lion bar­rels per day in 2017 over 2016 lev­els. OPEC ex­pects trans­port ex­pan­sion in the de­vel­op­ing world to dou­ble the num­ber of pas­sen­ger cars on roads world­wide from 1 bil­lion to 2.1 bil­lion in 2040. While sales of hy­brid, elec­tric and hy­dro­gen-pow­ered cars are cer­tainly grow­ing, they re­main a small, sin­gle-digit percentage of global sales. OPEC and many other an­a­lysts pre­dict they will make up for less than a quar­ter of the global pas­sen­ger ve­hi­cle fleet by 2040. With to­tal pas­sen­ger ve­hi­cle sales ex­pected to dou­ble dur­ing that time, and no suit­able re­place­ment for oil for avi­a­tion, ship­ping and man­u­fac­tur­ing emerg­ing, global oil de­mand has noth­ing to fear from the elec­tric car—yet.

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