LA JOLLA, Calif., May 13 - U.S. industrial customers are still seeing falling oil demand with a return to normal operations not coming until late this year or early 2010, the chief executive officer of oil major BP Plc (BP.L) said on Wednesday.
"Most of our industrial customers are still seeing declining demand. It's not at the pace it was in the first quarter," said CEO Tony Hayward.
Demand will decline until the fourth quarter of 2009 and the return to relative normalcy will be gradual, he added during a speech to the Latin American Energy Conference held by the Institute of the Americas in La Jolla, California, north of San Diego.
Hayward said that his company's and global oil demand is obviously linked to the current global financial crisis, which includes a credit crunch.
"I'm optimistic that by the end of this year or the early part of next year the financial system will have returned to a relatively normal way of operating," he said. "That is to say, small- and medium-sized companies will be able to find the credit they need."
Demand destruction will be slowed by economic stimulus plans in both the United States and China, he said.
Hayward said China's stimulus programs to boost consumer demand will be quicker because the government and Chinese companies can synchronize their actions easier than can U.S. companies and its government.
"At the end of the day, there are only two countries that matter in dragging us out of this (global recession) and that is this (the United States) country and China," Hayward said.
The party's over for highflying financial risk-takers, he said.
"When you've had such a big party like we've had for the last 20 years," it will take some time to clean up after the revelers, he said. "There are going to be a lot of storms in this as we come out of this recession."
Hayward pointed out that the International Energy Agency EIA said that by 2030, the world will need 40 percent more energy than is consumed today.
"The demand for energy will continue to grow and we need to be prepared to respond," said Hayward.
Latin America will play a significant role in developing more oil reserves and advancing alternatives to fossil fuels such as ethanol. Latin America currently produces 12 percent of the world's oil and 7 percent of its natural gas, he said.
Hayward said BP sees an ever-increasing share of biofuels in the gasoline market.
"I think it's quite conceivable over the next decade of having biofuel penetration into gasoline pool in both Europe and the United States reaching as much as 20 percent."
Hayward said that ethanol made from sugar cane, in which Brazil is the leader, is going to be more influential than corn-based ethanol that is currently the most widely used in the United States.
Sugar cane ethanol "is the piece of the first-generation biofuels that makes the most sense."
The British oil major entered the Brazilian biofuels industry a year ago, taking a 50-percent stake in Tropical Bioenergia SA, a joint venture between Brazilian sugar and ethanol producer Santelisa Vale and Maeda, which grows cotton and grains.
WAITING FOR THE SUN
While ethanol may be a fifth of gasoline supply in a decade, solar power won't compete with conventional energy sources until its technology is developed, the BP chief said.
"I think solar is probably the most challenged of all of BP's alternative energy interests," Hayward said. "It is not going to make the transition to be competitive with more conventional power. The gap is too big. ...If solar is going to make a breakthrough, there will be a technology disintermediation step," he added.
It will be the "second half of the 21st century" before solar energy will truly compete with conventional power sources, he said. Those sources currently are coal, natural gas, fuel oil, hydro power and nuclear power.
Wind is further along in its development, he said. Hayward said that he agrees with wind industry advocates who say that 20 percent of U.S. power generation will be from wind by 2020.
"Most of our industrial customers are still seeing declining demand. It's not at the pace it was in the first quarter," said CEO Tony Hayward.
Demand will decline until the fourth quarter of 2009 and the return to relative normalcy will be gradual, he added during a speech to the Latin American Energy Conference held by the Institute of the Americas in La Jolla, California, north of San Diego.
Hayward said that his company's and global oil demand is obviously linked to the current global financial crisis, which includes a credit crunch.
"I'm optimistic that by the end of this year or the early part of next year the financial system will have returned to a relatively normal way of operating," he said. "That is to say, small- and medium-sized companies will be able to find the credit they need."
Demand destruction will be slowed by economic stimulus plans in both the United States and China, he said.
Hayward said China's stimulus programs to boost consumer demand will be quicker because the government and Chinese companies can synchronize their actions easier than can U.S. companies and its government.
"At the end of the day, there are only two countries that matter in dragging us out of this (global recession) and that is this (the United States) country and China," Hayward said.
The party's over for highflying financial risk-takers, he said.
"When you've had such a big party like we've had for the last 20 years," it will take some time to clean up after the revelers, he said. "There are going to be a lot of storms in this as we come out of this recession."
Hayward pointed out that the International Energy Agency EIA said that by 2030, the world will need 40 percent more energy than is consumed today.
"The demand for energy will continue to grow and we need to be prepared to respond," said Hayward.
Latin America will play a significant role in developing more oil reserves and advancing alternatives to fossil fuels such as ethanol. Latin America currently produces 12 percent of the world's oil and 7 percent of its natural gas, he said.
Hayward said BP sees an ever-increasing share of biofuels in the gasoline market.
"I think it's quite conceivable over the next decade of having biofuel penetration into gasoline pool in both Europe and the United States reaching as much as 20 percent."
Hayward said that ethanol made from sugar cane, in which Brazil is the leader, is going to be more influential than corn-based ethanol that is currently the most widely used in the United States.
Sugar cane ethanol "is the piece of the first-generation biofuels that makes the most sense."
The British oil major entered the Brazilian biofuels industry a year ago, taking a 50-percent stake in Tropical Bioenergia SA, a joint venture between Brazilian sugar and ethanol producer Santelisa Vale and Maeda, which grows cotton and grains.
WAITING FOR THE SUN
While ethanol may be a fifth of gasoline supply in a decade, solar power won't compete with conventional energy sources until its technology is developed, the BP chief said.
"I think solar is probably the most challenged of all of BP's alternative energy interests," Hayward said. "It is not going to make the transition to be competitive with more conventional power. The gap is too big. ...If solar is going to make a breakthrough, there will be a technology disintermediation step," he added.
It will be the "second half of the 21st century" before solar energy will truly compete with conventional power sources, he said. Those sources currently are coal, natural gas, fuel oil, hydro power and nuclear power.
Wind is further along in its development, he said. Hayward said that he agrees with wind industry advocates who say that 20 percent of U.S. power generation will be from wind by 2020.
