trending Market Intelligence /marketintelligence/en/news-insights/trending/wft9w3isk8sjebvybzgt1q2 content esgSubNav
In This List

BP economist sees US shales, OPEC dominating future oil market

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


BP economist sees US shales, OPEC dominating future oil market

BP Plc expects a surge in global natural gas and renewables demand over the next two decades but also believes that the demand for oil will say strong. The company expects that a majority of the oil supply to meet that demand could come from a pair of current foes: U.S. shale oil producers and OPEC.

In a discussion on the company's 2018 energy outlook at Houston's Rice University, BP Chief Economist Spencer Dale said oil demand is likely to decline in the U.S. between now and 2040 but remain largely steady around the world.

"Nobody expects oil demand to decline a great deal in the next 20 years; nobody expects it to grow [in the] next 20 years," he said. Of the oil produced to meet demand in that time frame, "about half comes from U.S. tight oil and half comes from OPEC members," Dale said

Despite the fact that the two sides have spent much of the past three years attempting to destroy each other, market dynamics look likely to lead to the U.S.-OPEC split in market share. "In our outlook, we have both U.S. tight oil and OPEC oil growing over this period of time. I think the intuition here is a lot of that OPEC oil and shale oil are competitive," he said. "The losers are the other sources of oil farther up the cost curve. So that's why I expect U.S. tight oil and OPEC oil to grow over this period of time."

BP also said in its outlook that the U.S. will be the world's premier natural gas producer, thanks to shale. "The U.S. emerges as the biggest producer of both oil and gas, with clear daylight between the U.S. and the next largest producer," Dale said. "The U.S. will produce about one-quarter of the world's natural gas. Russia will be second with just 15%."

BP's outlook sees significant coal-to-gas switching in the power sector globally, helping gas demand increase while coal endures a major slide in the next two decades.

Dale said the increase in gas demand has multiple sources but could also be overstated.

"It depends on what part of the world you're in. In the U.S., the very large driver of the coal to gas switching we've seen is economics. The availability of low-cost gas has crowded out coal from the power sector, and I don't see any reason that should stop. We think there's plentiful supplies of shale gas, and that will allow gas to continue to gain share relative to coal in the U.S power sector," he said. "In other parts of the world, the main driver of that coal-to-gas switching is not economics, it's more policy-induced. ... That's not inevitable, because it's expensive to switch from coal to gas."