Argus Summit: Boom-bust oil future ahead: McNally
Houston, 19 January (Argus) — Opec effectively has lost the ability to manage oil prices as the world embarks upon a long-term boom-bust cycle, said Rapidan Energy Group president Bob McNally.
McNally, who closed out the Argus Americas Crude Summit in Houston, Texas, this week said Opec showed it could not mollify crude prices when they spiked well over $100/bl in 2008, as the Texas Railroad Commission and the Seven Sisters group of international oil producers yielded control until 1973.
McNally noted that the first "ad hoc cartel" to control prices happened in western Pennsylvania in 1861. It eventually failed, like every one since, and McNally predicted Opec's latest agreement to hold back production will evaporate too.
"I would argue we have been in a post-Opec era since 2008," McNally said.
Government projections of peaking gasoline demand overplay the influence of electric cars and auto mileage standards, he said. US fuel demand by 2022 is more likely to grow from around 9.3mn b/d today toward 9.7mn b/d, rather than the Energy Information Administration (EIA) prediction of about 9mn b/d.
McNally projects a growing global middle class will join US motorists in using more fuel. That kind of demand will help crude return to $100/bl or more over the next few years as global spare capacity disappears amid lower investment outside of US shale –- with the possibility of a bust or two along the way.