London-based Business Monitor International has forecast a fall in refined fuel prices between now and 2016, with the sharpest overall fall occurring between 2012 and 2014. North American consumers, the company says, will benefit less from this trend than those in other regions, while refiners are expected to struggle, particularly in Europe and the United States.
Volatility in prices will remain high, says BMI. "continued Iranian and US sabre-rattling in the Hormuz Strait," notes BMI, "could have resulted in a US$5-US$15/barrel (bbl) premium in current prices. Furthermore, unless demand contracts in an unprecedented fashion, a clear price floor has been established due to the cost of developing the capital-intensive projects from which much of 2012's stabilising volumes are expected to be drawn."
Splitting the downstream world into three principle blocs - North America, Europe and emerging markets - BMI predicts that cheap crude in the Midwest, Rocky Mountains and Gulf Coast of the United states has brought major opportunities for refiners, even as high feedstock prices force northeast sites to close.
The high price of crude has forced many governments in emerging markets to review their policy of subsidising fuel, BMI notes. While the company does still anticipate losses for refiners forced to sell fuel below market value, it does believe that liberalising will create opportunities. In Europe, BMI says, the outlook is "somewhat bleaker" and nearby oil-rich countries represent more attractive investment areas.
Overall, diesel and gasoline have been projected to fall in real terms, with diesel prices experiencing the more pronounced decline. "While there will be a sharp fall in refined fuels prices in 2012, cheaper costs are only likely to help most companies weather the crisis rather than avoid it. As for refiners themselves, lower demand and therefore, lower prices, will still continue to hurt margins, although we see room for growth in some emerging countries and in some parts of the US," says BMI.
PetrolWorld 25012012
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