Robert Rapier:
... Here are the EIA's projections:
Every case assumes at least a few more years of tight oil supply growth. The Reference case shows shale/tight oil production growth of two to three million BPD over the next three years, before leveling off and remaining at approximately that level until 2050.
The Low Oil Resource case projects tight oil growth of another million barrels per day through about 2022, and then a steady production decline until 2050.
... But there's one item that barely gets a mention in the EIA's Annual Energy Outlook. It is something I witnessed firsthand when I was recently in the Permian Basin. Oil production can expand only as quickly as infrastructure can keep up. And it is struggling to keep up.
It's not just crude oil pipelines that are an issue. Along with oil comes associated natural gas. In some cases, producers have no outlet for this gas, so they flare it. But there are various legal limits to flaring. This week, I heard about a producer who is having to reduce production because they are bumping up against their permitted limits for flaring.
In addition to potential infrastructure constraints, higher oil prices also lead to greater demand for oilfield services providers. That leads to higher costs for the oil producers and higher profits for drilling and fracking services providers.
At present, one of the bottlenecks in the Permian Basin is with the fracking service providers, and that is leading to a growing backlog of drilled-but-uncompleted wells (DUCs). This is helping to constrain production in the Permian Basin but was not a risk identified in the EIA's production projections.
BP: Demand for Oil Could Peak By Late 2030s
Global demand for crude is likely to "plateau" during the late 2030s, mostly because of the rise of electric cars and trucks, BP predicted Tuesday in its annual outlook.
BP thinks 320 million electric vehicles will be on the road by 2040, compared with about 2 million in 2016. The company thinks electrics will hit a tipping point and really take off after 2035.
... BP acknowledged its outlook considered a "range of scenarios." Its central case, the "evolving transition" scenario, assumes that government policies, technology and societal preference evolve in a similar manner to the recent past.
BP's forecast for "plateauing" oil demand by 2040 differs from OPEC's view of the future. In November, the oil cartel led by Saudi Arabia predicted that the global appetite for crude would keep growing through 2040.
But even OPEC conceded that oil demand would "decelerate steadily" due to slower economic growth, higher oil prices, energy efficiency and "strong competition from other energy sources."
Another oil giant, Royal Dutch Shell, has predicted peak oil demand could come within 15 years.
BP has become much more bullish on electric cars over the past year. The oil company now expects 190 million electric vehicles will be on the road by 2035, compared with about 2 million today. Last year's BP annual outlook called for a much more modest 100 million electric vehicles in 2035.
By 2040, BP expects oil to contribute to 85% of total transportation fuel demand, compared with 94% today. BP anticipates alternative fuels will "penetrate the transport system" and traditional vehicles will become vastly more efficient, meaning they will guzzle much less gasoline.
BP acknowledged that future electric vehicle popularity is "hard to predict with any certainty" because it depends on factors like government policy, technology and social preferences.
Unlike their American counterparts, big European oil companies are increasingly putting their money where their mouths are by betting on electric cars.