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Source: Bloomberg

 

 

The huge finds in Natural Gas and historically low prices on a per BTU basis is driving more more big energy consumers away from Crude Oil. This could lead to a global plateau in Oil demand by the end of the decade, according to Seth Kleinman, the head of European energy research at Citigroup.

Crude oil is now about four times more expensive than natural gas for equal amounts of energy. This could have enormous significance for how we power cars, trucks, railroad engines and power plants.

David Wilson quoted Kleinman, noting “Oil demand growth may be topping out sooner than the market expects.” Greater fuel economy may combine with the shift toward gas to cause global demand to level off at about 91 million barrels a day, the report said.

Fascinating.

 

 

Source:
David Wilson
Bloomberg, March 27, 2013

Category: Energy

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14 Responses to “Is Oil-Demand Plateauing?”

  1. AHodge says:

    also more supply, Iraq of all places
    , angola as well as the frakking. have been thining about shorting it…

    • jib10 says:

      Well, remember this whole shift depends on oil prices staying high. Oil is the best energy source we have and the global infrastructure is built to optimize its use. Price being equal, oil will always be burned first. That puts a hard floor on how far oil prices will fall.

      Fear of the oil price coming down is why it has taken so long for biz to adjust to the spread between oil and ng. Would you want to start a multi-million $ long term conversion from oil to ng if you thought the oil price would go down?

      Also you have the whole WTI – Brent spread that needs to equalize. That should happen as the pipelines reverse and we begin pulling oil from Cushing to the gulf. WTI should rise and Brent should fall.

      Anything is possible in the short term but I am not taking the Taleb bet on oil (DOTM options).

  2. Apinak says:

    How much of the lower price of Natural Gas are due to the fact that fracking is exempted from the Clean Water Act? How much subsidy are we providing by accepting widespread contaminated ground water?

  3. interguru says:

    The current price of natural gas, due to oversupply, is about half its cost of production. In time the price will come into equilibrium with the cost. It still will be less per BTU than oil, but 2 times less, not 4x less.

    • The Window Washer says:

      As the cheap oil moves out of the market to you think the cost of new BTU’s of oil or gas will increase faster?

  4. The Window Washer says:

    Please for the love of god can we get an energy policy. Just the current account adjustment would be worth it.
    Get long haul trucks on gas it then throw some money at turbine engines for local trucks.

  5. Bob A says:

    and solar will play an increasing role

    Saudi Arabia launches massive solar power procurement program
    http://www.ameinfo.com/saudi-arabia-launches-massive-solar-power-330677

    The introductory procurement round will consist of five to seven projects with a combined capacity of up to 800 megawatts. The introductory round is part of Saudi Arabia’s a colossal program to procure 41,000 gigawatts of solar power facilities by 2032.

    Solar Frontier to cut thin-film module costs by half by 2017
    http://reneweconomy.com.au/2013/solar-frontier-to-cut-thin-film-module-costs-by-half-by-2017-2017

  6. GeorgeBurnsWasRight says:

    I’d think the impact of China will be significant, as in many world economic issues. It seems to me the Chinese face two main issues. First, more citizens want automobiles, plus increasing truck mileage as their internal economy grows. Second increasing pollution if they meet this demand with oil-based vehicles might force them towards natural gas-powered vehicles instead.

    • SumDumGuy says:

      Don’t forget India, either. 2.5B Chinese + Indians with a car ownership rate less than 5%.

  7. Lyle says:

    Note that this is a north america centric point of view. Look elsewhere in the world where natural gas prices are tied by contract to oil, and a lot of lng is used and the situation is different. Prices are 3 to 4x the us price there. Please point out that this is a north american point of view. In Europe its coal that is growing. Of course a part of this is the Europeans fear of the “evil” fracking, but another part is a different sort of geology, which means that new techniques might be needed. However the basic concept which also applies to north american oil, is that producing the source rock is better, and that is essentially what is being done. (Source rock is the material from which the petroleum is generated, in traditional production the generated oil and gas have to find a migration path to a reservior rock which needs a seal to keep the oil and gas from just escaping.

  8. WFTA says:

    Hopefully the arbitrage between natural gas and crude will begin to drive gas into transportation fuel (I’m surprised it hasn’t been more quickly adopted by hub-centered fleets like Fedex, UPS, USPS, city buses.) Cheaper and less CO2.

    The production (or extraction, if you prefer) economics are considerably enhanced by the relative abundance of natural gas liquids which is feeding a resurgent chemicals and plastics industry in North America.

    I have no reason to think the shale plays are more plentiful in North America than the rest of the world. We were fortunate to have a robust geological survey. So the “peak energy” horizon is probably pushed much farther forward. Drillers must learn how to recycle their water efficiently and effectively.

    Now all we have to worry about is climate change.

    Have a swell weekend and holiday.

  9. bear_in_mind says:

    Oil and NRG need to be way-stations to much cleaner, more efficient sources of energy conversion such as solar (see: http://www.solarimpulse.com/) and fuel cell technologies. Roll more efficient use of said oil and NRG via better internal combustion tech, lighter vehicles, better aero and mass transit = less carbon fuel consumption overall. That should be the worldwide approach, but too many deniers to get there yet.

  10. Global peak demand wrt oil is an identifiable threshold marked by a definitive Oil/GDP ratio. This Peak Demand Barrier (discovered by the Barrel Meter model in Oct/2011) blocked new monthly Consumption records in 1980, 2008, 2011 & 2012. Today it is demarked by $112/barrel USA Refiner Acquisition Crude ($107 WTI). RAC is $99 today. Terminal peak demand will occur when these intermittent incursions of the Peak Demand Barrier become permanent.

    Barrel Meter model price projections suggest this final encroachment occurs in 2036 upon RAC exceeding $266/barrel. However it is unlikely this episode signals Peak Oil. That epic event will have occurred six years earlier when constraints on accessing Proved Reserves limited further production growth. At this time Peak Oil is predicted as 101-Mbd in 2030.

    peak oi charts: http://trendlines.ca/free/peakoil