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Page added on November 14, 2016
Oil demand growth could fall below 1% by 2018
Impact investment firm Wermuth Asset Management (WAM), has said that regardless of whether oil prices rise around potential OPEC production-capping news, there is no long-term future for the hydrocarbon sector. Solar power is now available at $3 cent/kWh, which is equivalent to oil at $5/barrel.
According to WAM research, continued investment in Oil and Gas exploration would only make sense if oil majors and oil producing countries were to develop new projects that could output at less than $5/barrel.
OPEC expects demand growth to slow from 1.3% this year to 1.2% next year. WAM’s research indicates that while oil supply might not peak in the next few years, peak oil demand and negative demand growth is likely to occur.
WAM believes this will happen more quickly than the oil industry expects it to, with demand growth falling below 1% by 2018 and becoming negative by 2020.
Jochen Wermuth, Founding Partner, Wermuth Asset Management commented ahead of OPEC’s November meeting:
“If we look at the OPEC cartel, Saudi Arabia and Russia are its most important players. These are economies that could, if they wanted, lead the field in terms of diversifying energy resources. In the Middle East, Dubai has been the most innovative on solar power. The other Emirates may soon follow, along with other GCC countries that benefit from a lot of sun. Without efforts to diversify, we expect to see countries such as Russia and Saudi Arabia struggle in future years.”
WAM highlights the competitive pricing of renewable energy without subsidies as a likely growth driver for the sector.
The sustained oil price slump has led to a major decline in investment in the hydrocarbon industry, with capital flows increasingly directed elsewhere.
According to the International Energy Agency, renewable power installations around the world have outpaced fossil fuel installations for at least the last two years.
The lower oil price environment has reinforced that trend, with at least 95 US oil companies going bankrupt. This has made the financial community wary of investing in fossil fuel exploration and production.
Globally, combustion engine cars are increasingly uncompetitive with their electric counterparts. In Europe, some are now used to feed power onto the grid.
The Nissan Leaf can be bought for around EUR 20,000, and can earn up to EUR 2,000/year by selling power into the grid.
Trends of this kind are expected to lead to a long-term contraction in oil demand.
Wermuth concluded:
“At the macro level the GCC remains heavily reliant on oil. This is having a profound impact on its economies. Now we are reaching peak Oil and Gas demand, the creditworthiness of fossil fuel producing countries may start to erode. Economic models built on oil wealth are flawed, and a commitment to developing a renewable power infrastructure will be critical for weathering the impending storm. Some GCC countries have already begun this process, but they must not wait to see where prices are going – we don’t see the recent slump as merely a phase in a cycle.”
11 Comments on "Oil demand growth could fall below 1% by 2018"
Dredd on Mon, 14th Nov 2016 5:45 pm
This may help (The Authoritarianism of Climate Change – 2).
Davy on Mon, 14th Nov 2016 7:05 pm
Alternative energy is making great strides but this momentum is not sustainable. The biggest issue is an economy in decline. If you read these alternative energy articles you rarely read anything about the health of the economy and renewables in relation to that health. A slowing economy and or higher interest rates will dent alternative energy momentum. Its simple and it is the economy. The same is true for oil. Demand destruction combined with depletion is killing the oil industry.
Boat on Mon, 14th Nov 2016 8:19 pm
Davy,
We disagree of course. Wind is growing because of one thing. It’s cheaper than FF where there is decent wind. As wind tech brings us larger turbines areas that are viable will continue to grow. There is already a massive market.
Funding is easy to obtain because the market is very stable compared to FF. You lock in a 20 year price for electricity for example.
The transportation sector delivers most of the FF demand but the cost of EV’s are just to high. It’s going to take much longer than 4 years to get to a scale to drop the price and compete.
rockman on Mon, 14th Nov 2016 9:36 pm
Just picking out one piece of BS: “combustion engine cars are increasingly uncompetitive with their electric counterparts.”
“Global ICE vehicle sales reached 88.7 million units in 2015, a 2.0% increase from prior-year”
And from the US DOE:
Although plug-in light vehicle (PEV) sales in the United States declined by 3% in 2015, sales in China more than doubled, surpassing all other countries in the number of PEVs sold. Western Europe as a whole had the second highest volume of PEV sales in 2015 and saw an increase of 80% over 2014. Though Japan and Canada had lower sales of PEVs by volume, they both had significant increases in PEV sales from the previous year. In 2011, global PEV sales were just 50,000 units. Four years later, global PEV sales have increased more than ten-fold to over 565,000.”
To summarize in 2015:
Global ICE sales: 88,700,000
Global alt vehicle sales: 565,000 (0.7% of total vehicle sales. And that was a huge growth spur. Except in the US, the largest motor fuel consumer on the planet burning 70% more the #2 China.
And according to the “experts” at Wermuth “Trends of this kind are expected to lead to a long-term contraction in oil demand.”
Harquebus on Tue, 15th Nov 2016 12:10 am
Ironically, the renewable energy industry appears to be destroying the oil industry which, without it can not survive.
Personally, I think that some oil production will far outlive the renewable energy pipe dream.
Cheers.
brough on Tue, 15th Nov 2016 4:38 am
The greatest threat to oil demand is not the inexorable rise of EV vehicles but the probability of global recession, precipitated by any number of reasons. The risk of global instability seems to be increasing by the day at the moment. Anyone who thinks they can predict the timing of peak oil demand and how steep the down side will be, are living in a realm of soothsayers. Time to sacrifice a goat and examine it’s entrails.
rockman on Tue, 15th Nov 2016 9:44 am
H – “…the renewable energy industry appears to be destroying the oil industry…”. Can you offer some specific examples? BTW much of the development of the Texas world class alt energy system occurred concurrently with the shale boom in S Texas. In fact the Eagle Ford Shale boom is located adjacent to the second largest concentration of wind farms in the state.
You know what I do for a living. You know I’m surrounded by folks that do the same. Not once have I heard a single person express the least bit of concern about alt energy competition. As mentioned before the only time I’ve heard a oil field had mention EV’s was an interest in buying one. Really.
The only statements about such “competition” has come from folks NOT in the fossil fuel biz.
Boat on Tue, 15th Nov 2016 6:05 pm
This is the largest estimate of continuous oil that USGS has ever assessed in the United States.
The Wolfcamp shale in the Midland Basin portion of Texas’ Permian Basin province contains an estimated mean of 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas, and 1.6 billion barrels of natural gas liquids, according to an assessment by the U.S. Geological Survey. This estimate is for continuous (unconventional) oil, and consists of undiscovered, technically recoverable resources.
The estimate of continuous oil in the Midland Basin Wolfcamp shale assessment is nearly three times larger than that of the 2013 USGS Bakken-Three Forks resource assessment, making this the largest estimated continuous oil accumulation that USGS has assessed in the United States to date.
“The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” said Walter Guidroz, program coordinator for the USGS Energy Resources Program. “Changes in technology and industry practices can have significant effects on what resources are technically recoverable, and that’s why we continue to perform resource assessments throughout the United States and the world.”
Davy on Tue, 15th Nov 2016 6:10 pm
Rock, can you fact check this please.
“A $900 Billion Oil Treasure Lies Beneath West Texas Desert”
http://tinyurl.com/gsl8s8e
“One portion of the giant field, known as the Wolfcamp formation, was found to hold 20 billion barrels of oil trapped in four layers of shale beneath the desert in West Texas, the U.S. Geological Survey said in a report on Tuesday. That’s almost three times larger than North Dakota’s Bakken play and the single largest U.S. unconventional crude accumulation ever assessed. At current prices, that oil is worth almost $900 billion. The estimate lends credence to Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield’s assertion that the Permian’s shale endowment could hold as much as 75 billion barrels, making it second only to Saudi Arabia’s Ghawar field. Pioneer has been increasing its production targets all year as drilling in the Wolfcamp produced bigger gushers than the Irving, Texas-based company’s engineers and geologists forecast.”
Apneaman on Tue, 15th Nov 2016 6:14 pm
Boat, it could be true. I have heard the USGS make similar claims only to flip flop later. The flop was 96% than the original flip. But if it gives you a big stiffy boat , then by all means sell the farm and invest it all in the new tumor.
USGS Downgrade of Recoverable Oil in the Monterey Shale of California
USGS Downgrade of Recoverable Oil in the Monterey Shale of California
Take it to the bank
EIA Cuts Recoverable California Shale Estimates By 96%
http://www.businessinsider.com/eia-monterey-shale-2014-5
rockman on Tue, 15th Nov 2016 7:50 pm
Davy – Don’t need to fact check. Of course there’s 20 billion bbls UNDERNEATH the west Texas desert in just that one formation. Big f*cking deal. LOL. There is more PROVEN residual oil in already discovered fields UNDERNEATH the west Texas desert. Big f*cking deal. And there are hundreds of billions of bbls of oil trapped UNDERNEATH just the area along the Gulf Coast. Big f*cking deal.
And globally? There are TRILLIONS of bbls of oil trapped in the shales. And yes: big f*cking deal.
I’m a bit surprised at you. I’m sure you know the difference between oil in place, technically recoverable oil and commercially recoverable oil at a specific price point.
So here’s THE question: of those 20 billion bbls how many are TECHNICALLY recoverable? Most folks, such as the USGS et al estimate only 10% to 20% is technically recoverable. And the even BIGGER question: how many of those 20 billion bbls are COMMERCIALLY recoverable at $45/bbl? Oh, one more biggie: of those reserves that might be recoverable at the current oil price how long will it take to produce them: 10 years…20 years…40 years?And would the added production rate exceed the decline rate of the existing wells?
In truth until someone can come up with CREDIBLE answers to those questions it doesn’t really matter if the 20 billion bbls are FACT or not, does it? LOL.