Gaso­line’s hey­day may be run­ning on fumes

Ex­perts dis­agree on tim­ing but say de­mand near peak

Baltimore Sun - - WORLD - By Javier Blas and Laura Ble­witt

Af­ter fu­el­ing the 20th cen­tury au­to­mo­bile cul­ture that re­shaped cities and de­fined mod­ern life, gaso­line has had its day.

The In­ter­na­tional En­ergy Agency fore­casts that global gaso­line con­sump­tion has all but peaked as more ef­fi­cient cars and the ad­vent of elec­tric ve­hi­cles from new play­ers such as Tesla Mo­tors halt de­mand growth in the next 25 years. That shift will have pro­found con­se­quences for the oil-refin­ing in­dus­try be­cause gaso­line ac­counts for one in four bar­rels con­sumed world­wide.

“Elec­tric cars are hap­pen­ing,” IEA Ex­ec­u­tive Di­rec­tor Fatih Birol said in an in­ter­view in London, adding that their num­ber will rise from lit­tle more than 1 mil­lion last year to more than 150 mil­lion by 2040.

The crest­ing of gaso­line de­mand shows how rapidly the oil land­scape is chang­ing, cast­ing a shadow over an in­dus­try that com­monly f ore­casts decades of growth ahead. Royal Dutch Shell, the world’s sec­ond­biggest en­ergy com­pany by mar­ket value, shocked ri­vals this month when a se­nior ex­ec­u­tive said over­all oil de­mand could peak in as lit­tle as five years.

The IEA doesn’t share Shell’s pes­simism. While the agency an­tic­i­pates a gaso­line peak, it still fore­casts over­all oil de­mand grow­ing for sev­eral decades be­cause of higher con­sump­tion of diesel, fuel oil and jet fuel by the ship­ping, truck­ing, avi­a­tion and petro­chem­i­cal in­dus­tries.

For Philip Ver­leger, pres­i­dent of the con­sul­tant PKVer­leger in Colorado As elec­tric cars, such as those from Tesla, be­come more pop­u­lar, gaso­line de­mand is ex­pected to de­cline. and a vet­eran oil-mar­ket an­a­lyst, the IEA’s out­look is one of the more op­ti­mistic out­comes for the global in­dus­try.

“Re­fin­ers across the globe can only hope that this fore­cast turns out to be right — be­cause all the in­di­ca­tions are to­day that con­sump­tion is go­ing to be­gin drop­ping not in 2030, but prob­a­bly in 2020,” Ver­leger said. “It’s the best news a dying pa­tient can hope to get.”

The pro­jec­tions are part of the anal­y­sis the Paris­based IEA did for its “World En­ergy Out­look 2016” flag­ship re­port. The agency fore­cast that gaso­line de­mand will drop to 22.8 mil­lion bar­rels a day by 2020 from 23 mil­lion bar­rels a day last year. By 2030, con­sump­tion will re­bound slightly, reach­ing a peak of 23.1 mil­lion bar­rels a day, be­fore fall­ing again to­ward 2040.

The fore­cast is more pes­simistic than the one re­leased a year ago, when the IEA saw ro­bust de­mand growth from now un­til 2030.

Gaso­line has been the world’s choice to power au­to­mo­biles from as far back as the 1950s, when Henry Ford’s dream that ev­ery mid­dle-class Amer­i­can could own a car be­came re­al­ity.

Now, how­ever, car com- pa­nies — most ob­vi­ously Tesla, but also in­cum­bents such as Gen­eral Mo­tors, BMW and Nis­san — are putting their money and rep­u­ta­tions be­hind elec­tric ve­hi­cles. With tech­nol­ogy im­prov­ing — espe­cially for bat­ter­ies — prices are fall­ing. Tax breaks, par­tic­u­larly in China, are help­ing sales.

Global gaso­line de­mand grew by nearly 20 per­cent from 1990 to 2015 de­spite com­pe­ti­tion from diesel in Europe, where the fuel ben­e­fited from tax breaks. In the next 25 years, gaso­line con­sump­tion will drop 0.2 per­cent, ac­cord­ing to the new IEA cal­cu­la­tions. While the num­ber of pas­sen­ger ve­hi­cles will dou­ble to 2 bil­lion by 2040, “the amount of oil we use for cars will be lower than to­day,” Birol said.

As gaso­line de­mand sput­ters in advanced economies, mid­dle dis­til­lates, fu­els used to power trucks and jets, will con­tinue to see growth in the next decade as economies ex­pand.

Re­fin­ers would be wise to tar­get dis­til­lates such as diesel in lieu of gaso­line as they grap­ple with fad­ing con­sump­tion, said Michael Wo­j­ciechowski, vice pres­i­dent of Amer­i­cas oil and refin­ing mar­kets re­search at Wood Macken­zie in Hous­ton.

LUKE SHARRETT/BLOOMBERG NEWS

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