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30 comments on OPEC Meets as Oil Demand Turns the Corner

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Nate Hagens on September 8, 2009 - 9:30pm Permalink | Subthread | Parent | Comments top

I wonder what the oil demand graphs would look like without 30%+ of G-20 GDP guaranteed by governments via Commercial Paper purchases, loan guarantees and other financial bailouts?

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Morgan Downey on September 9, 2009 - 1:00am Permalink | Subthread | Parent | Comments top

That is a great question. I have a feeling based on past recessions that the absolute barrels consumed would be no different.

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The Dude on September 9, 2009 - 6:57am Permalink | Subthread | Parent | Comments top

Hmm, here's what obtained in the 80s with gasoline/distillates/resid:

Gasoline vs Fuel Oil Supplied Annual

The sharp decline in resid was due to the cutback in using oil for electrical generation. Gasoline demand dropped sharply in '79/'80, plateaued for a while, then began to pick up again. 1988 gasoline consumption was 99% of 1978's, with CAFE standards bumping up all the while. Some talk of a huge dip in overall consumption in the 80s that was only surpassed in the 90s, a lot of this however was accounted for by items like the fuel oil in my graph.

What do you think of the impending contraction in refining, Morgan? Deloitte's study projects ca. 2 mb/d of US output being shut down in the next few years; do you think the overall global figure will stay flat with new builds? And do you know how complex this new refining is - will it have the capacity to crack all the heavy sour we have on hand, or are we facing a glut of road oil etc.?

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Morgan Downey on September 9, 2009 - 5:45pm Permalink | Subthread | Parent | Comments top

The refining industry is facing a tough time globally as a lot of new refining capacity is coming online around the world. The newly built refining capacity covers the gamut of complex at one extreme to very simple (Chinese tea pot refineries) at the other end.

With excess refining capacity the 2010-2020 period is shaping up to look a lot like the 1980s for refiners with a long stretch of very low refining margins siting on top of volatile crude oil prices.

There should be plenty of capacity available to crack all heavy sour crudes - although the margins may be quite low for doing so.

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30 comments on OPEC Meets as Oil Demand Turns the Corner

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