Eric Watkins
Oil Diplomacy Editor
Royal Dutch Shell PLC released a report entitled "Shell Energy Scenarios to 2050" and just in case anyone thought the future would be rosy, read on. With the subtitle, "An era of volatile transitions," Shell's report makes for a fascinating read.
One of the more interesting sections of the report takes up the issue of future demand growth. And, like one or two other scenario planners, Shell has its finger on the key movement in saying, "Oil demand is swinging from west to east."
The recession-driven drop in oil demand occurred mainly in the countries in the Organization for Economic Cooperation and Development while developing economies continued their strong growth, Shell said, adding that in the medium term, demand will continue to fall in OECD countries as efficiency measures take effect. But how quickly this will happen?
CAFE standards take time
According to Shell, postrecession and post-Copenhagen policy developments in major energy-consuming countries will determine investment in alternative energies and reward consumer behavior towards higher efficiency solutions.
"But it will take time for the new Corporate Average Fuel Economy (CAFE) standards in the US to take effect by moving consumers away from SUVs to (plug-in) hybrid vehicles," Shell says.
Congress enacted the CAFE regulations in 1975 to improve the average fuel economy of cars and light trucks (as well as trucks, vans, and sport utility vehicles) sold in the US after the 1973 Arab oil embargo.
Anyway, just as it will take a while for those changes to take effect in the US, so too will it take time for the EU and Japan to move towards passenger transport electrification.
Chinese cars drive demand
Meanwhile, according to Shell, China's "aggressive motorway building program and rising prosperity" are key to strong demand growth. Demand will also remain strong in the Middle East and in other developing countries.
"The net effect is that global oil demand will increase," according to Shell, which says that meeting this expected growth will rely increasingly on alternative sources of energy supply, like natural gas liquids, biofuels, and unconventional oil.
Gas demand will grow strongly, driven by economic growth and the thrust towards lower-carbon fuels. Lower-cost gas-fired power generation will replace some coal-fired generation.
Growth in renewable energy also means more gas-fired power plants are required to provide flexibility. The success in unconventional gas production in the US will underpin demand growth.
The future may not be altogether rosy, but it is still a future in which the global oil and gas industry will play the leading role.
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com