Two oil imponderables: markets and politics
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Two oil imponderables: markets and politics Bob Tippee, Editor, Oil & Gas Journal PVF Roundtable Aug. 19, 2008
description
Two oil imponderables: markets and politics. Bob Tippee, Editor, Oil & Gas Journal PVF Roundtable Aug. 19, 2008. Background: US energy politics. Era of regulation: ’70s (’30s for natural gas) through mid-’80s Era of deregulation: mid-’80s through 2005 Reregulation now. - PowerPoint PPT Presentation
Transcript of Two oil imponderables: markets and politics
Two oil imponderables:markets and politics
Bob Tippee, Editor, Oil & Gas JournalPVF RoundtableAug. 19, 2008
Background: US energy politics
Era of regulation: ’70s (’30s for natural gas) through mid-’80s
Era of deregulation: mid-’80s through 2005
Reregulation now
Characteristics of the eras Era of regulation
Price and consumption controls Shortage Category cheating
Era of deregulation Adequate supply Low prices most of the time Inattention to energy Policy tilt
The policy tilt
Prices decontrolled Consumption decontrolled Domestic supply limits on…
Federal leasing, permitting restrictions Refinery construction
The global context
Demand growing worldwide, too Supply expansion reaching limits Supply jolts of 2002, 2003, 2005
The reckoning
US gasoline and politics
New attention to energy
Energy Policy Act of 2005 -- reregulation
Bush in 2006: US “addicted to oil” Energy Independence and Security
Act of 2007 -- reregulation Continuing pressure on candidates,
lawmakers to do something about high gasoline prices
Proposition
The market is beating politicians to the punch with price relief.
OGJ annual forecasts
Forecast & Review Jan. 21, 2008
Midyear Forecast July 14, 2008
Marilyn Radler, Senior Editor – Economics Laura Bell, Statistics Editor
High crude prices: the reasons
Fundamentals Demand rising faster than supply can
expand Market’s “cushions” thin
Extraordinary forces Weak dollar Rush of scared money into commodities
World oil demand (MMb/d)
0
10
20
30
40
50
60
70
80
90
100
2004 2005 2006 2007 2008
OECD
Non-OECD
Source: IEA except OGJ forecast for ’08.
86.8 +0.9%
FSU +2.4%
China +6.7%
ME +4.6%
LA +5.4%
January:
+1.8%
2009: 87.7 (IEA July)
World demand: observations OECD demand down 1% Non-OECD demand up 3.3% GDP growth in Non-OECD oil
exporters Subsidies in Asia, Latin America,
Middle East Lifting in much of Asia Staying in much of L. America, Middle
East
World oil supply (MMb/d)
0
10
20
30
40
50
60
70
80
90
100
2004 2005 2006 2007 2008
Proc. Gain*
OECD
Non-OECD
OPEC
*Plus other biofuels. Source: IEA
Stocks +0.6
87.4
+2.2%
Non-OPEC supply (MMb/d)
48.5
49
49.5
50
50.5
51
51.5
52
52.5
53
2004 2005 2006 2007 2008
Non-OPEC
Fcst.
Source: IEA; Note: Angola (1.7 MMb/d), Ecuador (0.5 MMb/d) joined OPEC in ’07.
50
N.C.
2009: 50.6 (IEA July)
Yearly change: demand, non-OPEC supply (MMb/d)
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
2004 2005 2006 2007 2008
Demand
Non-OPEC
Source: IEA. Note: Angola, Ecuador joined OPEC in 2007.
Expected non-OPEC up 1.1 MMb/d in January
Expected demand up 1.5 MMb/d in January
2009 (IEA July):
Demand +.800
Non-OPEC +.600
Pressure on OPEC (MMb/d)
Needed from OPEC in ’08 = 32.3 May OPEC crude (IEA) = 32.3 Group quota = 29.67 May OPEC capacity (IEA) = 34.97 Effective spare capacity (less
Indonesia, Iraq, Nigeria, Venezuela) = 1.95 (1.7 in July IEA)
Stocks low
OPEC’s spare capacity (EIA)
OPEC production capacity in ’08
Saudi Arabia +.200-.300 to 10.95*
Nigeria +.200-.300 to 2.16
Angola +.170 to 2.05
Algeria +.050 to 1.45 via EOR
Total OPEC: +600 Mb/d to 35.6 MMb/d
(End-’07 f’cast: 35.8 MMb/d)
Change net of decline in MM b/d
*Plan: to 12.5 MMb/d by end ’09; Source: IEA
Summary: Global oil market
Extraordinary forces waning Demand growth slowing Supply growth in prospect “Cushions” thickening
US product demand (MMb/d)
0
5
10
15
20
25
2004 2005 2006 2007 2008
Others
LPG, ethane
Resid
Distillate
Jet fuel
Mogas
20.25 -2.2%
Note: Before exports (1.55 MMb/d in ’08). Source: EIA for 2004-07
20.7 N.C.
January:
-0.6%
All product categories down
Gasoline, distillate demand (MMb/d)
0
1
2
3
4
5
6
7
8
9
10
2004 2005 2006 2007 2008
Gasoline
Distillate
Source: EIA for 2004-07
4.18 -1%
9.2
-1%
’08 ULSD forecast assumes 80% of distillate
Red line = ULSD
Gasoline, ethanol use (MMb/d)
0
1
2
3
4
5
6
7
8
9
10
2004 2005 2006 2007 2008
Gasoline
Ethanol
’08 is mandate (587 Mb/d)
9.2
-1%
Source: EIA
ULSD, biodiesel use (MMb/d)
0
0.5
1
1.5
2
2.5
3
3.5
4
2006 2007 2008
0-15 ppm S dist.
Biodiesel
Source: EIA
3.34 +13%
Applied 80% factor to dist. demand
Industry oil imports (MMb/d)
0
2
4
6
8
10
12
14
16
2004 2005 2006 2007 2008
Products
Crude
12.95
-3.6%
64.0
Top numbers: % of total US demand:
64.966.363.1 65.9
Source: EIA for 2004-07
Imports down .48; demand down .45; liquids output up .06
US total liquids production (MMb/d)
0
1
2
3
4
5
6
7
8
2004 2005 2006 2007 2008
NGL, LRG
C and C
6.97 +1.2%
Source: EIA for 2004-07
US gas consumption (tcf)
20.5
21
21.5
22
22.5
23
23.5
24
24.5
2004 2005 2006 2007 2008
Cons.
Fcst.
Source: EIA for 2004-07
23.86 +3.5%
Marketed gas production (tcf)
0
5
10
15
20
25
2004 2005 2006 2007 2008
Other
Fed GoM
Louisiana
Texas
21.2 +5%
Source: EIA for 2004-07
US gas imports (bcf)
-2
-1
0
1
2
3
4
5
2004 2005 2006 2007 2008
Exports
LNG
Mexico
Canada
4.2
-9.1%LNG 0.4 -51%
Source: EIA for 2004-07
Summary: US oil market
Oil demand down Gasoline demand down Diesel use rising; supply a question Ethanol use growing (mandate) Oil production, refining capacity rising Gas production zooming
Energy proposals now
OCS leasing off East Coast More subsidies for politically favored
energy sources Heavy spending on alternative fuels All in framework of “doing something”
about high gasoline prices
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