FRAMINGHAM, Mass. -- World petroleum consumption is now above 98 million barrels per day (bpd), up 5 million bpd from the year prior. The Asia Pacific region leads in consumption, with China at 12 to 14 million bpd, and Japan, India and South Korea ranging from 9 to 12 million bpd.
Despite the Saudis still exporting 7 million bpd, Iran 3 million bpd, Iraq 2 million bpd and the other Gulf States 6 million bpd, we are losing at least:
- 1 million bpd from Venezuela (politics),
- 500,000 bpd from Mexico (incompetency),
- 1 million bpd from Russia (sanctions),
- and 500,000 bpd from Nigeria (politics).
In total, we are losing 3 million bpd on the margin, at a time when U.S. and Canadian production is 10 million bpd with a recovering North American demand of 20 million bpd. It is not just that the United States and Canada are no longer net importers. Given the global need for petroleum, they have become the supplier of last resort to a thirsty world.
The good news is that we have ample reserves, no political disruptions, a strong currency that will get stronger and the ability to export crude and refined products (although our refining industry, especially independents, are facing headwinds from Renewable Identification Number, or RIN, prices). So U.S. and Canadian production will need to be in excess of 20 million bpd—up from current 14 million bpd—and that will take $70 crude.
The Saudis and Iranians, along with the Gulf States, could easily increase production 3 million bpd (and they may either officially or by “leakage”), which would dampen the call on North American crude. But prices will need to stay firm and go higher to keep shale production going, and to continue the switch to alternative transportation fuels (electric, hydrogen, natural gas).
The era of $100 oil is gone forever, but so is the era of $40 oil.
Joe Petrowski is an advisor to BW Gas & Convenience dba Yesway, Des Moines, Iowa, a c-store unit of Brookwood Financial Partners LLC, Beverly, Mass. He is also founder of Mercantor Partners LLC, a private-equity group focused on downstream energy distribution and retail convenience, and former CEO of Cumberland Farms and Gulf Oil.
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