Oil-Demand Plateau Seen as Natural Gas Favored: Chart of the Day

Oil demand may reach a plateau worldwide by the end of the decade as cars, trucks, railroad engines and power plants increasingly use natural gas instead, according to Citigroup Inc. analysts.

As the CHART OF THE DAY illustrates, U.S. prices for the fuels provide an economic incentive to make the switch. Crude oil is about four times more expensive than gas for a similar amount of energy, measured in British thermal units, based on New York futures trading.

“The shift from oil to gas is already under way in the U.S.,” Seth Kleinman, the head of European energy research at Citigroup, and five other analysts wrote yesterday in a report. Other countries are poised to follow suit, they wrote, as gas becomes more plentiful and anti-pollution efforts intensify.

China has more than 40,000 trucks that run on liquefied natural gas and plans to put up thousands of service stations for these vehicles and passenger cars, the report said. In the U.S., a growing number of corporate and public-transit fleets use LNG or another fuel, compressed natural gas, they added.

Canada, Russia and India are testing locomotives fueled by LNG, Citigroup’s analysts wrote. So is BNSF Railway Co., a unit of Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), which said earlier this month that it will operate six LNG engines this year.

Photographer: Craig Hartley/Bloomberg

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Photographer: Craig Hartley/Bloomberg

In the U.S., a growing number of corporate and public-transit fleets use liquefied natural gas or compressed natural gas.

Gas may supplant oil as a fuel for generating electricity in the Middle East, India and Latin America, the report said. Citigroup’s analysts added that international shipping and petrochemical companies may make similar shifts.

“Oil demand growth may be topping out sooner than the market expects,” Kleinman, based in London, and his colleagues wrote. Greater fuel economy may combine with the shift toward gas to cause global demand to level off at about 91 million barrels a day, the report said.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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