In part 1, it appears as though there will be an excess of supply due to the events in North America.
Even the oil minister of Saudi Arabia voiced concern over the unexpected rapid increase in the supply of unconventional oil.
But that’s without seeing what is happening in Asia.
China, 2020 vs 2013
|Increase in supply||+1 Mb/d|
|Increase in demand||+5 Mb/d|
Total excess supply
Automobile sales have increased 10% per year for the last few years, with sales in 2013 equaling or exceeding this rate. Oil consumption increased 7% per year since 2009, while natural gas use in vehicles tripled.
It’s pure conjecture whether China’s supply of oil will increase substantially as the result of fracking by 2020, but a 1 Mb/d increase is possible.
Until fracking produces large supplies of natural gas, China will have to import expensive natural gas. Recent natural gas consumption has been increasing by 20% per year, and the government has been encouraging its use in transportation. The number of natural gas vehicles in China has tripled over the past 3 years. Much of this has been CNG in western provinces where natural gas supplies are prevalent, though LNG is beginning to find its way into the eastern part of the country.
The prospects for LNG usage in trucks, fleet vehicle, barges, and, to some extent, passenger cars, are very favorable.
Using Natural gas for trucking could erode the use of diesel fuel, by perhaps 1 Mb/d in 2020.
The confluence of these events should result in demand for oil increasing by around 5 Mb/d in 2020.
India, 2020 vs 2013
|Increase in supply||0 Mb/d|
|Increase in demand||+2 Mb/d|
Total excess supply
Recent automobile sales have been stagnant. Recent growth in oil consumption has been about 0.2 Mb/d.
India imports large amounts of expensive LNG, but it seems to be having little effect on displacing oil for light vehicles and trucks.
Remainder of world:
It would appear that oil supply and demand for the rest of the world will be in balance through 2020.
A cursory look at these estimates, parts 1 & 2, establishes that what happens in North America and China determines whether supply and demand remain in balance between now and 2020, assuming no major conflicts.
Adding the pluses and minuses of excess oil supply through 2020 indicates a near perfect balance.
Forecasts beyond 2020 are speculative, but the above back of the envelope exercise in forecasting supply and demand should create confidence in the EIA and IEA forecasts through 2040.
Key events after 2020 are likely to include:
- China’s population plateauing at around 1.4 billion (2030)
- North America’s unconventional oil production leveling off, with only small annual increases
- India’s population increasing from 1.2 billion to 1.5 billion, a substantial, if not explosive growth rate.
- Africa’s population exploding from 1 billion to 1.8 billion by 2040.
Population growth in India and Africa could accelerate demand, but are wild cards.
- India lacks resources except for coal, and has a poorly developed energy infrastructure.
- Sub-Saharan Africa can best be described as a mess
The EIA and IEA forecasts, and the potential for even greater demand from India and Sub-Saran Africa, throws cold water on the environmentalists’ dream of a new peak oil, where a peak in supply outstrips demand, as explained in The Economist magazine.
If, however, environmentalists are able to curtail fracking in North America, there will be an entirely different outcome, where demand outstrips supply … and that will have negative consequences.
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