Jul 9, 2018, 7:30 PM ETPanel

Energy Markets: The Year Ahead for Oil, Gas and Renewables

Oil prices have surged to approximately $70 per barrel, driven by OPEC+ discipline in maintaining production cuts and reduced output from traditional "cheaters" like Venezuela, which is now over-compliant due to internal instability.
Global oil demand growth is projected at 1.6 to 1.7 million barrels per day, supported by robust consumption despite high prices.
The forward price curve remains in backwardation, with front-month prices near $70 while the back-end (five-year) curve sits near $53, reflecting market uncertainty regarding long-term demand drivers.
Panelists warn that despite high current prices, long-term investment in new large-scale projects remains constrained, potentially creating a supply deficit as existing fields decline.
A consensus exists that "peak oil demand" is unlikely to occur within the next 20 years; even under aggressive electric vehicle adoption scenarios (70% of vehicle kilometers by 2040), total oil demand is forecast to exceed current levels due to growth in aviation, marine transport, and petrochemicals.
Bernard Looney (BP) noted that while "peak demand" dates are highly variable and often inaccurate, IEA sustainable development scenarios still require 85 million barrels per day of oil by 2050.

Major Integrated Oil Companies (IOCs) have cut capital expenditure, yet operational efficiency has improved significantly; BP's Mad Dog Phase 2 project in the Gulf of Mexico cost $20 billion in 2014 but is now estimated at $8–9 billion for the same reserves.
Private equity firm Apollo Management is actively acquiring distressed shale assets and acreage in low-cost basins (e.g., Permian, SCOOP) with break-even costs between $30 and $60, targeting a long-term price of $80.
Investment focus is shifting toward midstream infrastructure, specifically gas compression and gathering systems, driven by the shale gas boom.
Digital transformation and AI are cited as key productivity drivers; Apollo's supercomputing capabilities reduced the time to identify a 200-million-barrel field from 1,000 years to two weeks.
OPEC's strategy is now pivoting to target capital investment levels in conventional projects, potentially leading to further production cuts in 2019 to maintain price floors.

Natural gas demand is growing faster than any other fossil fuel, particularly in China, where LNG imports rose 48% last year, pushing the country to become the world's second-largest importer.
Panelists argue natural gas acts as a necessary "bridge fuel" to replace coal, reducing carbon emissions by 50% and particulate matter, a transition driven by the Paris Accord and domestic air quality concerns in China.
Renewables currently account for roughly 3% of global energy demand and are projected to grow at 7% annually through 2040, yet are forecast to represent only 25–40% of global power generation by 2040.
Intermittent renewable sources (wind/solar) require significant natural gas backup capacity; as renewable penetration rises, the marginal cost of providing this backup increases exponentially, making gas the only economically viable solution for grid stability without battery breakthroughs.
Apollo Management declined to invest in renewables, citing subpar equity returns (low to mid-single digits) that rely heavily on tax credits rather than fundamental economics.

The U.S. energy independence from shale has altered geopolitical leverage, displacing traditional exporters like Nigeria (which supplied light sweet crude to the U.S.) and reducing reliance on Middle Eastern oil imports.
Russia has gained global influence by forming a strategic alliance with OPEC, acting as a financial backer for distressed regimes like Venezuela and expanding its footprint in Libya and the Middle East.
Major oil exporters, including Saudi Arabia and UAE, are increasingly seeking access to U.S. shale gas for domestic power generation and forming downstream partnerships in India and China to secure captive markets.
Mexico's upcoming elections pose a material risk to $200 billion in expected energy investment, with panelists expressing concern over potential policy rollbacks under the Lopez Obrador administration.
The U.S. is poised to become a net energy exporter within 5 to 10 years, though it remains a net importer today, necessitating continued engagement with volatile regions.

BP has committed to a framework of reducing its own emissions, improving the carbon efficiency of sold products (shifting to 55% gas mix by 2021), and investing in low-carbon ventures like biofuels and cement carbon capture.
Freeport LNG projects a doubling of the global LNG market by 2030, with demand potentially reaching 600 million tons annually, driven by infrastructure projects with a 4–6 year lead time.
Panelists rejected the notion of a single "winner" in the energy transition, advocating for a multi-fuel approach that includes nuclear, hydrogen, carbon capture, and energy efficiency to drive down emissions.
U.S. greenhouse gas emissions have returned to 1990 levels primarily due to the substitution of coal with natural gas, a trend panelists expect to continue globally as nations seek to reduce pollution.
Downstream strategies are evolving for national oil companies to focus on petrochemicals and captive markets rather than just crude volume sales, with significant investment directed toward India and China.