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Page added on July 15, 2017

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Refocus On Four Strategic Issues More Pressing Than ‘Peak Demand’

Consumption

The concept of “peak oil demand” has been gaining more traction over the last year. While many long-term forecasts have long anticipated some slowing of demand as efficiencies improve and energy intensity falls, recent conversations about the viability of EVs has made peak demand feel more real and more imminent.

While Stratas Advisors predicts a slowing of future demand in its reference case output due to a number of factors, demand “peaking” and actually showing a structural decline is likely decades away. Even with rapid penetration of EVs, major demand sources in shipping/trucking, aviation and petrochemicals are all going strong with little demonstration of a non-hydrocarbon alternative.

As such, discussions around peak demand, while important, are proving a distraction from key strategic shifts we are seeing along the entire oil and gas value chain. Peak demand is likely to happen someday, but long before that these four issues will emerge as critical concerns for oil and gas stakeholders–most of them are in fact already happening.

Shifting product consumption mix–Products that have been the core focus of refiners, i.e., gasoline and diesel, will not experience the same growth profile as LPG or jet fuel. Combined with a continued phase-out of fuel oil consumption, refiners and pipeline operators will be faced with wider heavy/light product differentials and a need to retool existing infrastructure while producers are likely to see a shift in crude slate by refiners. This is not to mention intra-product dynamics like octane, sulfur specifications and the increased penetration of biofuels.

Traditional E&P model under pressure–Traditional producers, e.g., integrated oil companies, are squeezed between an ever more-efficient shale patch and resurgent resource nationalism in hydrocarbon rich nations. As access to stable, low-cost oil production areas is constrained traditional E&P stakeholders will need to radically shift their long term market strategy to see growth. Finally, the ability for these companies to deploy their plentiful capital nimbly and in reaction to structural market moves will present operational and tactical challenges.

The global rush to natural gas–In the U.S. and around the world, demand for gas continues to ramp up. Despite the Trump administration’s backpedaling from the Paris Climate Accord, state-level regulations combined with economic coal plant retirements will drive higher U.S. demand, while global demand for gas (and a supportive regulatory regime in key consuming countries) will drive higher LNG exports. The current forward market is not adequately reflecting this upcoming demand growth, setting the stage for a potentially sharp price correction.

Key demand centers unable to keep up–Outside of China and India, key growth markets appear unable to develop domestic resources and infrastructure fast enough to keep pace with internal demand. LNG, crude and product exports to Southeast Asia will continue to rise, supporting longer haul shipping and widening geographic price spreads.

oil and gas investor



10 Comments on "Refocus On Four Strategic Issues More Pressing Than ‘Peak Demand’"

  1. rockman on Sat, 15th Jul 2017 8:15 pm 

    “the viability of EVs…more imminent.” So imminent in defined as we saw in the 2016 global sale of cars and light trucks: 82 million ICE’s and 1.5 million EV’s. Imminent???

  2. Cloggie on Sun, 16th Jul 2017 3:34 am 

    So imminent in defined as we saw in the 2016 global sale of cars and light trucks: 82 million ICE’s and 1.5 million EV’s. Imminent???

    It is all a matter of government policy. In Norway the e-vehicle penetration is 40 times the global average:

    http://tinyurl.com/y9p2574b

    The fact that they have a lot of hydro (besides oil and gas) helps as well of course. By 2025 it is no longer allowed in Norway to buy a gasoline vehicle. Other countries like Holland, Germany and even India want to join this trend set by Norway.

    America is no longer a trend setter and under Trump even wants to return to the old fifties glory days of fossil fuel, which is a mistake.

    But e-vehicle penetration will eventually happen in the US as well. Internet penetration was also faster in Western Europe than in the US, mostly because of higher population density in Europe, which made it cheaper to connect everybody. But even in backward Romania internet is faster than in the US.

    Country ranking internet speed:

    http://www.internetsociety.org/map/global-internet-report/?gclid=CPyJo_SxjdUCFUMo0wodok4Lag#download-speed-fixed

    Won’t be much different with introduction speed e-vehicles.

  3. Davy on Sun, 16th Jul 2017 5:17 am 

    “It is all a matter of government policy”
    Government policy is wonderful. Just look around the world at where government policy has taken us.

    “But even in backward Romania internet is faster than in the US.”
    Dumbass compares a country of 19MIL to a country of 320MIL. Internet speeds vary widely and for good reason. Many rural areas have slower speeds because of the cost of upgrading. How fast does internet need to be anyway? I think we have more stupidity of “we are better than you are” BS that is typical of the old men with dementia.

  4. peakyeast on Sun, 16th Jul 2017 5:39 am 

    Norway is in the midst of an economic upturn from their fossil fuels – they are not accustomed to having so much money so they are spending it left and right…

    Concerning internet: I think the sweet spot is below 2mbit/down 1/mbit up. If the average person gets more than that its just used for leisure – like tv-series streaming.

    Also by limiting transport rate on tcp/udp packets we could eliminate most online gaming – thus freeing up a lot of human potential and energy.

  5. Davy on Sun, 16th Jul 2017 6:11 am 

    “Also by limiting transport rate on tcp/udp packets we could eliminate most online gaming – thus freeing up a lot of human potential and energy.”
    Yea, no shit, we are becoming a hollow species mainly because of our technological hideaways. A real shocker would be going back to human and animal labor, without luxuries and with a half full belly.

  6. Cloggie on Sun, 16th Jul 2017 7:14 am 

    Norway is in the midst of an economic upturn from their fossil fuels – they are not accustomed to having so much money so they are spending it left and right…

    Intrinsically an e-vehicle is cheaper than a gasoline one. Because an e-motor is cheaper than an Ottomotor with all these moving parts and pumps and gears and what not.

    https://de.wikipedia.org/wiki/Ottomotor

    https://en.wikipedia.org/wiki/Electric_motor

    E-motor is simpler, weighs less, is silent and doesn’t stink and can run on renewable energy. Advantages as far as the eye can see.

    Getting there is a matter of economies of scale. A case like Norway can very help achieving that economy of scale, just like an equally small country like Denmark enabled the wind turbine revolution. The question is: who volunteers to be pioneer?

    On top of that, now that the EU has said A with the Paris Accords, it needs to say B with e-vehicles and renewable energy to fuel them.

    Dumbass

    It is a pity that Davy is rapidly descending to the apneaman/anonymous league with his juvenile name calling. Usually a sign of running out of arguments.

    Dumbass compares a country of 19MIL to a country of 320MIL. Internet speeds vary widely and for good reason. Many rural areas have slower speeds because of the cost of upgrading.

    Romania has a lower population density and is more rural than the US. Your argument doesn’t fly. The real reason: the US is descending into third world status as a result of decades of mass migration from the third world, organized by the deep state that intends to use this new demographic as a new proletariat to start a Bolshevik 2.0 revolution with, this time on US soil. Enjoy the Gulag and pray that the Europeans will come to your aid.

    https://www.youtube.com/watch?v=t9eVfXy5nwQ

  7. Makati1 on Sun, 16th Jul 2017 7:24 am 

    Cloggie, Davy has no ammunition to fire but duds. He lives in a dying country with nothing positive to brag about but war. He loves to try to make other places seem worse than the FSofA, but cannot prove his assertions. He is good for laughs.

  8. Cloggie on Sun, 16th Jul 2017 7:35 am 

    This is the motor of the currently best sold e-vehicle in Europe at the moment, the Renault Zoe:

    https://s1.paultan.org/image/2015/06/zoe-engine-plant-0040.jpg

    Verify how simple it is.

    And here the simple technological setup of the car:

    http://myrenaultzoe.com/wp-content/uploads/2013/03/2013-Renault-Zoe-Z.E-21_Zoe_Battery_Renault_s.jpg

    It is still an open question what car energy source will prevail:

    – battery like above

    – fuel cell with liquid hydrogen:

    https://deepresource.wordpress.com/2017/07/08/formic-acid-as-car-fuel/

    – liquid electrolyte (with petrol station-like reload times):

    https://deepresource.wordpress.com/2017/06/04/ifbattery-instantaneous-recharging-a-battery/

  9. Davy on Sun, 16th Jul 2017 10:14 am 

    Clog, you are decending into extremism. You have a Eurotard attitude. Europe is not the best place on earth. You want to talk about Europe like it is the future. Your agenda is a typical too good to be true fluff. You are just like the other dumbass makati who hazes and praises. People who cut down others and talk up themselves ususally have insecurity issues or are just plain delusional. You and makati are of the delusional kind. Both of you are seniors who are loosing your faculties. In your case it has been a rapid decline. It is a pitty because you do contribute some great alternative energy material. makati on the other hand is just a blowhard. Clog, don’t fall off into makati’s world. You have much to offer us.

  10. Cloggie on Sun, 16th Jul 2017 10:49 am 

    Clog, you are decending into extremism.

    “Extremism” is a meaningless abstraction, you can attach to anything.

    You have a Eurotard attitude.

    What does that mean, “eurotard”, other than as a smear?

    Europe is not the best place on earth.

    Where do I say that?

    You want to talk about Europe like it is the future.

    Where do I confuse the future with the present? Yes I talk about the possibility of a renewable energy future, but I know very well it is the future, not the present. You consistently call yourself a “doomer”, implying that YOU pretend to have knowledge about the future that can’t be changed. I do not like the doomer attitude.

    Your agenda is a typical too good to be true fluff.

    Why is it to good to be true, to imagine that we can have a renewable energy base? Should we abandon efforts in that direction because “it is too good to be true”? There are no physical laws speaking against it. The technology (wind turbines, solar panels, etc.) has already matured, although storage is admittedly still an issue, but even here there are too many promising possibilities to enumerate.

    Yes I am a renewable technology enthusiast and evangelist and I will continue to be that until somebody shows me that it can’t be done. Won’t happen.

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