The International Energy Agency (IEA) forecasted that global oil markets are expected to experience a significant surplus by the end of this decade. However, Bob McNally, President of Rapidan Energy Group, warned of a potential shortage of transportation fuels by 2028.
What Happened: During CNBC’s “Last Call” on Wednesday, McNally emphasized the need for more refineries to avoid severe supply constraints.
McNally stated, “We see a shortage of transportation fuels by 2028 and if we don’t get more refineries built…we are going to be really tight.”
His comment comes amid IEA’s medium-term oil market report that highlights a surge in supplies and a slowdown in demand growth due to the adoption of lower-emission energy sources.
Oil demand is projected to peak by 2029 and start declining the following year, reaching 105.4 million barrels per day by 2030. This is attributed to the increasing adoption of clean-energy technologies.
Meanwhile, oil production capacity is expected to grow to nearly 113.8 million barrels per day, driven by producers in the U.S. and the Americas. The IEA noted that this could lead to a lower oil price environment, posing challenges for U.S. shale producers and the OPEC+ bloc.
McNally highlighted that despite the growing demand for electric vehicles (EVs), there is no substantial evidence indicating that efficiency gains and EV penetration are on track.
According to McNally, recent policy changes, such as the EU’s tariffs on Chinese EVs and Germany’s reduction of EV subsidies, further complicate the situation.
He concluded, “We are just not on track for that rapid decarbonization.”
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Why It Matters: The warning from McNally comes amid a series of significant developments in the energy sector. The International Energy Agency (IEA) reported that the sale of electric vehicles, which made up one-fifth of all new cars sold globally last year, led to a noticeable reduction in oil demand. However, despite this shift, energy-related emissions still rose due to an “exceptional” shortfall from the climate crisis.
Additionally, the Biden administration has recently tightened vehicle fuel mile standards to promote the electric vehicle market. The new regulations are part of a broader strategy to ensure that most new passenger cars and light trucks sold in the U.S. are all-electric or hybrids by 2032.
Furthermore, the IEA has also revised its oil demand forecast for 2024, reducing the growth estimate to 1.2 million barrels per day from the previous 1.3 million barrels per day. This adjustment reflects the ongoing impact of electric vehicles and a general economic slowdown on oil demand.
Image from Shutterstock
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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