OPEC world oil out­look re­veals de­mand near­ing a plateau

Muscat Daily - - BUSINESS - NATHANIEL BULLARD

PEC last week pub­lished its an­nual World Oil Out­look, a re­li­ably huge and dense ex­am­i­na­tion of the fu­ture of the car­tel’s main prod­uct, as well as the mar­kets that will drive its growth and com­pete against it. Bloomberg Opin­ion’s Liam Den­ning re­ferred to this year’s out­look as ‘dour’ and, in the medium term, even de­spair­ing of its mem­bers’ con­tri­bu­tion to the global sup­ply of crude oil, nat­u­ral gas liq­uids and other liq­uid fu­els.

While While the global oil mar­ket is re­li­ably huge, in OPEC’s view, parts of it are soon to be ex-growth, and by 2040 - global de­mand will hardly grow at all. Start­ing in 2020, oil de­mand growth in while de­mand from Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment (OECD) coun­tries turns neg­a­tive. In­dia and China are re­li­able growth mar­kets through­out, though to a de­clin­ing de­gree, while de­mand from OECD coun­tries con­tin­ues to erode. The net re­sult is that oil de­mand is ex­pected to grow by only 100,000 bar­rels per day in 2040, in a mar­ket with daily de­mand in ex­cess of 110mn bar­rels. A 0.09 per cent growth rate is very close to no growth at all.

De­mand growth is also highly con­cen­trated in just a few sec­tors. Road trans­port, the largest chunk of oil de­mand to­day, and petro­chem­i­cals, the sec­ond-largest, also ac­count for al­most 60 per cent of to­tal de­mand growth. In terms of rel­a­tive growth, though, avi­a­tion is tops, with al­most a one-third growth in de­mand from 2020 to 2040.

Road trans­port might be the king of oil de­mand, but OPEC is chang­ing its tune on cars, even if slightly. Its ex­pected pas­sen­ger ve­hi­cle fleet size, al­most 2bn in 2040, is hun­dreds of mil­lions of ve­hi­cles more than BloombergN­EF ex­pects. More in­ter­est­ing, though, is OPEC’s con­sis­tency in re­duc­ing its ex­pected fleet size each year. It doesn’t look like much year on year, but since 2014, OPEC has re­duced its ex­pected num­ber of new cars on the road by nearly 200mn. For com­par­i­son, there are just over 250mn pas­sen­ger ve­hi­cles in the US to­day.

OPEC’s vi­sion of to­tal de­mand growth - less than 10 per cent in two decades - re­veals an­other find­ing: Oil is not the big­gest con­trib­u­tor to meet­ing grow­ing en­ergy de­mand. That would be nat­u­ral gas. But oil also trails wind, so­lar and geother­mal en­ergy.

Here’s an up­date to a data set Den­ning and I ex­plored in our take on OPEC’s 2018 out­look: The num­ber of ap­pear­ances of key­words or con­cepts over time. Last year, we noted that the num­ber of men­tions of ‘elec­tric ve­hi­cles‘ and ‘tight oil’ were ex­actly the same. This year, given that the out­look is sig­nif­i­cantly shorter than it was last year. In 2019, ‘tight oil’ is nar­rowly ahead of ‘elec­tric ve­hi­cles’ for men­tions. Hot on the heels of both of these sig­nif­i­cant driv­ers of sys­tem change are two other con­cepts: ‘Hy­dro­gen’, which could be a sig­nif­i­cant re­place­ment for hy­dro­car­bons in the en­ergy sys­tem [as well as a new in­vest­ment op­por­tu­nity for oil and gas firms], and ‘cli­mate’. ‘Hy­dro­gen’ is on its way up, while ‘cli­mate’ is at nearly the same level as ‘elec­tric ve­hi­cles’ and ‘tight oil’.

OPEC’s lat­est World Oil Out­look looks at the fu­ture of the car­tel’s con­tri­bu­tion to en­er­gis­ing the global econ­omy, and finds an ever-flat­ten­ing tra­jec­tory. It’s not call­ing the top on oil de­mand, but it’s not far from it, either: It looks ahead, and it sees oil’s plateau.

The views and opin­ions ex­pressed in this col­umn are solely those of the author and do not nec­es­sar­ily rep­re­sent those of Mus­cat Daily or Apex Me­dia Pub­li­ca­tion

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