IEO2014: World liquid fuels consumption to rise 38% by 2040

In the 2014 edition of its International Energy Outlook (IEO2014), the US Energy Information Administration projected world liquid fuels consumption to rise 38% by 2040. The agency also pointed out that world markets for petroleum and other liquid fuels have entered a period of dynamic change—in supply and demand.

“The potential for growth in demand for liquid fuels is focused on the emerging economies of China, India, and the Middle East, while liquid fuels demand in the US, Europe, and other regions with well-established oil markets seems to have peaked,” EIA said.

In countries outside the Organization for Economic Cooperation and Development, demand growth has moderated as key economies, including China, India, and Brazil, have seen slower economic growth and correspondingly slower growth in liquids demand compared with the past 2 decades.

Liquids consumption among OECD countries, which reached a peak of 50 million b/d in 2005, has generally been trending downward since that time, reflecting both slowed economic growth and rising energy efficiency in the transportation sector.

New supplies of oil from tight and shale resources, beginning in North America and, eventually, in other parts of the world, have raised optimism for significant new sources of global liquids. There is also hope that recent legislative changes in Mexico will reverse that country’s recent trend of slowly declining oil production.

Outside North America, the potential for large production increases in Brazil, Argentina, and elsewhere could help ensure the availability of liquid fuels supplies for many years, according to EIA’s forecast.

IEO2014 projections of future liquids balances include two broad categories: crude and lease condensate and other liquid fuels. Crude and lease condensate includes tight oil, shale oil, extra-heavy crude oil, field condensate, and bitumen (i.e., oil sands, either diluted or upgraded). Other liquids refer to natural gas plant liquids (NGPL), biofuels (including biomass-to-liquids), gas-to-liquids, coal-to-liquids, kerogen (i.e., oil shale), and refinery gain.

As a result of new crude pipeline construction and crude pipeline flow reversals in the US, the wide spread between the West Texas Intermediate spot price and the North Sea Brent price eventually decreased in 2013 and 2014 from a high of about $30/bbl in 2011.

EIA expects the WTI-Brent spread to continue to decrease over time. The recent decision by the US Department of Commerce’s Bureau of Industry and Security to allow exports of some lease condensates after processing also has the potential to further reduce the spread between the Brent price and the price of domestic production streams.

Since July 2012, North Sea Brent prices have generally remained $100-115/bbl in nominal terms. Growing liquids supplies from the US and Canada has largely offset by supply disruptions in other oil-producing regions, notably in the Middle East and North Africa.

EIA estimates that unplanned crude oil production outages have averaged 2.7 million b/d over the past 2 years and generally have trended upward, from 1.8 million b/d in May 2012 to about 3.5 million b/d this past May. Libya and Iran, both members of the Organization of Petroleum Exporting Countries, as well as non-OPEC countries such as South Sudan and Syria have accounted for a sizeable portion of the unplanned outages.

“It is difficult to predict when the supplies may return, given the significant geopolitical difficulties faced by these producers. This adds considerable uncertainty to the mid-term and long-term projections,” EIA said.