Worldwide Petroleum-Liquid Supply and Demand (includes associated papers 52597 and 52598 )
Authors: Al-Jarri A.S. , Startzman R.A. 
Published: June 2014

In this study, we undertook the risky task of predicting the world's future supply of and demand for petroleum liquids [crude oil and natural gas liquids (NGL's)] to the Year 2050. On the basis of earlier work, we choose to forecast future supply using the Hubbert model, which has advantages of simplicity and availability of data. Although this approach has several known inadequacies, it has withstood the test of time in numerous cases, and we consider it a fairly reliable supply predictor. We also used the Hubbert model to forecast demand. We found no precedence for this use and currently regard its accuracy as speculative. Nevertheless, some signs indicate that it too may develop use over time as a reasonable predictor.

Our study showed that world supply (and demand) for petroleum liquids is currently at a peak and will soon decline. We examined supply and demand by region. Some regions, such as the Middle East, will produce a surplus of crude throughout the forecast period. Other regions, most notably the Far East and North America, will remain importers. Still other regions, such as Africa, that are now exporting will soon become importers.

Introduction

Our recent study,1 in which 67 worldwide production trends were presented and analyzed, showed that the Hubbert2–5 model generally can estimate production trends with good results. The analysis also showed that world ultimate recoverable crude oil will be ˜1.76 trillion STB. Of this amount, ˜1 trillion STB remained to be produced at the end of 1995. The Organization of Petroleum-Exporting Country's (OPEC's) current reserves are 709 billion STB, or 71% of world reserves.

In 1995, Ivanhoe6 modified a hypothetical Hubbert 2-trillion-STB ultimate world production scenario by restricting the production at ˜60 MMSTB/D until Year 2040, when world oil production ceased. He later suggested that world production will continue to increase and peak at ˜70 MMSTB/D in 2010 before exhibiting a normal field decline rate, the same as that seen in the oil fields in the lower 48 U.S. states.7

A recent 10-year (1995-2004) forecast by Foreman8 concluded that the global oil and condensate output will rise to 75 MMSTB/D in 2004. At the same time, OPEC's share of production will increase to approximately half and its members may again dominate the world market if the organization survives the next 10 years.

On the basis of the results of our recent study,1 this paper forecasts not only world supply of petroleum liquids, but also supply from different regions. We combined Hubbert models for all 67 countries into regions or organizations. The OPEC supply model was obtained by summing the individual models of its members. The world supply model was obtained by summing all 67 crude-oil supply models in addition to a separate model of world NGL's. The non-OPEC supply model can be found either by subtracting the OPEC from the world model after excluding NGL production or by simply summing up the non-OPEC models. These models take into account the combined performances of all producing countries that supply virtually all world crude oils and NGL's.

This study also proposes and tests the hypothesis that the demand for petroleum liquids follows the Hubbert model. The rationale for this hypothesis is based partially on the fact that world demand must equal world supply. If world supply reasonably follows a Hubbert model, then so should world demand. However, whether demand by country follows a Hubbert model is not clear. If world demand for energy continues to rise and the supply of petroleum liquids begins to fall, intense regional competition will occur for diminishing supplies of petroleum liquids and/or alternative sources of energy must be substituted. In either case, whether demand will follow a Hubbert model is unclear. Only one world region has experienced a dramatic decrease in demand for petroleum liquids for many years [Eastern Europe, mainly the Former Soviet Union (FSU)]. Thus, fuller testing of the Hubbert demand model for petroleum liquids will not be possible until other regions have experienced significant declines in demand.

Some well-established evidence, however, exists for the cyclical demand for various sources of energy in specific regions. Historical data reveal that the U.S. and U.K. have depended on various fuels to meet their energy requirements. Analysis of U.S. energy consumption (Fig. 1) indicates four cycles. Wood was the primary fuel in the 1800's. Coal consumption started in approximately 1800 but took 80 years to dominate and replace wood (approximately 20 years after the first commercial development of oil). Then, oil and gas consumption increased to dominate the energy market and replace coal. Oil and gas's percentage of total consumption peaked in 1971, then declined steadily to 1995. Oil's percentage of total consumption, however, reached its highest share (49%) a few years later in 1977, then declined steadily to 39% in 1995. Gas's share resembles that of oil but at a lower percentage. Nuclear-power consumption started in approximately 1960 (we consider it the start of the fourth cycle), and its percentage increased to approximately 8% by 1995. Similarly, U.K. energy consumption shows similar trends; however, consumption is still rising, while coal consumption is still declining. Thus, the conclusion can be drawn that reliance on oil is generally in a downward trend. Gas, coal (which is making a comeback in the U.S.), and nuclear power are increasing as a fraction of energy demand. Other forecasts9–11 show continually increasing growth of world oil demand. However, these models are unconstrained by supply.