Peak Demand in 3 Years? We don’t think so.

On May 17, 2022, Bill Vail represented Graves & Co. Consulting at the New York Energy Capital Assembly’s annual conference in New York City. Held at the New York Stock Exchange’s headquarters above historic Wall Street, the Assembly addressed today’s most urgent topics regarding environmental, societal and governance (ESG) corporate strategies.    

There’s no doubt that publicly-held oil & gas companies are committing significant time and resources to managing their ESG activities as well as preparing their respective boards with the data and analytics needed for filing future ESG annual reports. 

We would like to share what we believe are some of the key takeaways from the New York conference: 

• Experts predict that a peak in world crude oil demand will occur in the next three years. We believe peak demand won’t occur as early as this. When modeling global supply and demand, Rystad Energy predicts that headwinds generated by electric cars and trucks will result in measurable reductions in global oil demand. Moreover, this firm also believes that the sales of electric vehicles will make up 14% of all new vehicle sales by 2030. 

• It’s our opinion that peak demand for oil is much further out. In fact, the majority of our industry expect demand to peak between the late 2020s and the 2040s. The International Energy Agency (IEA), does not expect a peak before 2040, with rising demand in Asia and other Third World economies, growth in petrochemicals used in every aspect of modern life, and aviation demand more than offsetting declining oil demand for road transportation.

• As a counterpoint, Rystad Energy also predicts, even in the presence of an energy transition movement, that a significant amount of new oil will need to be sanctioned. In our opinion, any pending decline in global production volumes should be offset by new discoveries in both natural gas and oil, assuming regulatory and political hurdles can be addressed and overcome.

• The emergence of responsibly sourced gas (RSG) may lead the way for natural gas to take its proper place as the transition “fuel of choice.” Let’s not forget that some available energy source will need to be consumed in order to charge and re-charge all those electric vehicles.  

With regard to RSG, Northeast Natural Energy (NNE) of West Virginia is leading the movement. NNE is the first U.S. natural gas producer to be 100% in compliance with EO100 standards.  According to Equitable Origin, who helped assess NNE’s policies and performance metrics, they believed NNE went above and beyond in many areas including transparency, community health and safety, land rights, and bio-diversity.  It remains to be seen if RSG can generate future sales with enhanced netback prices for natural gas and NGLs, yet the goal remains enticing.

We welcome discussions on this topic, and would appreciate hearing what you think. Please reach out to us at bvail@gravesconsulting.us, or telephone us at 713/650-0811.  

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Graves & Co. Consulting is a registered professional engineering firm providing engineering and geological studies, financial analysis and technical evaluations of oil and gas assets for use in annual reports, field development planning, mergers and acquisitions, litigation and regulatory filings. Graves serves public and private E&P companies, banks, private equity firms, royalty trusts and mineral owners with assets throughout the United States, South America and Europe.