Global oil demand has outdone dire predictions of an early end but is in its “last gasp” of growth as fuel efficiency and the rise of electric vehicles look set to bring growth in gasoline use to a standstill by 2030, according to energy expert Fereidun Fesharaki.
The world’s consumption of crude oil has been increasing faster than most expected, boosted in recent years by the crash in oil prices in 2014-15, noted Dr Fesharaki, chairman of London-based consultancy FACTS Global Energy.
But he said the market was now in its last phase of growth, with consumption expected to expand by 0.7 per cent each year on average through to 2040 to reach 115 million barrels a day.
“We are in the last gasp of the oil,” Dr Fesharaki, a former energy adviser to the prime minister of Iran, said in an interview in Sydney, where he is due to address Credit Suisse’s annual energy conference.
“We still grow but we get to a level and we will stop. Peak oil is not going to come for a long time but peak gasoline is in front of us, peak gasoline [globally] is 2030, peak gasoline in Asia is 2040.”
The consultancy is expecting that improvements in fuel economy will erode 12 million barrels a day of oil demand between 2016 and 2040, double the amount of demand to be eroded by the rise of electric vehicles.
Meanwhile, however, oil demand is racing along, with FGE recently raising its forecast for growth this year to 1.7 million barrels a day from 1.5 million b/d.
The robust consumption, combined with disciplined production by OPEC and its allies and a drop in production from Venezuela, have wiped out the excess inventories that have plagued the market over recent years, putting prices on a northwards track, Dr Fesharaki said.
Brent oil was trading at about $US76.50 a barrel on Tuesday and has risen about 58 per cent in the past 12 months.
Dr Fesharaki said OPEC had to play a balancing act at its upcoming June 22 meeting to satisfy calls by US President Donald Trump and Russia’s Vladimir Putin for lower prices, but with US sanctions to be reimposed on Iran on November 4, which could remove another 1 million-1.5 million barrels a day from the market and send prices “easily” up to $US100.
At the same time, “two big mysteries” still overhang the market: the limits to US shale oil production and the position that Saudi Arabia Crown Prince Mohammad bin Salman, known as MBS, will take on oil, whether he is prepared to cut production to support prices.
“It’s a fragile balance … The pressure is now huge on OPEC to do something,” he said. “If the higher prices kill the demand, that would be a very serious blow for the oil market because it is the demand growth which has filled all these gaps.
“I think there is good understanding among everybody that this is a pretty OK situation – let’s not kill the golden goose,” he said, suggesting prices in the $US70-$US72 range may be “reasonable” for everyone.
In LNG, Dr Fesharaki is forecasting a fresh squeeze to hit the market at the end of 2022 after a dearth of fresh commitments to build new supply projects in recent years.
He said a lack of appetite among LNG buyers to sign new long-term purchase contracts would make it difficult for new projects to go ahead and said Woodside Petroleum’s Scarborough project in Western Australia was the “one potential story” for new Australian growth.
“Scarborough is going to be developed there is no question on that one,” he said, while still noting the task ahead on signing up customers and final decisions yet to be made on whether the gas would be processed at the Pluto or North West Shelf plants.
Dr Fesharaki said that while expansion in Papua New Guinea was the lowest cost LNG project in the region, there were several issues still to be sorted before it could move ahead, including financing, an agreement with the PNG government and LNG sales contracts
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