Middle East consumption may curb OPEC export availabilities: analyst

Boulder, Colorado (Platts)--11Apr2011/603 pm EDT/2203 GMT

OPEC's ability to export as much crude as the rest of the world would like is threatened by the rapid growth in regional demand for crude in the Middle East, a leading US energy economist told a conference in Boulder, Colorado on Monday.

Dermot Gately, a professor of Economics at New York University, said that, "we have a real problem on our hands in terms of OPEC being able to export as much oil as the non-OPEC world would like them to."

Addressing a conference organised by the International Research Center for Energy and Economic Development, Gately argued that the US Department of Energy has persistently underestimated Middle East demand growth -- and that DOE continues to argue it will grow much more slowly than income.

He said that OPEC's own oil consumption is likely to grow much faster than is projected by DOE and the International Energy Agency, perhaps as fast as OPEC income.

Now at 8 million b/d, which is nearly 25% of OPEC output, OPEC member-state consumption could grow to 18 million b/d by 2030 if it grows as fast as OPEC income, as it has for the last 25 years. That would be 40-50% of OPEC production by 2030, greatly constraining OPEC's ability to increase its oil exports.

Gately said this could result in a future in which OPEC investment in capacity is too slow and the world's need for OPEC oil goes unmet. As a result, he argued, the world might witness sharply higher prices in the short-term, prompting reduced global economic growth.

At the same time, the rest of the world would be encouraged to develop high-cost substitutes for oil while low-cost OPEC oil reserves remained under-utilized.

--John Roberts, john_roberts@platts.com

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