Adam Sieminski, head of the federal Energy Information Administration (EIA) gave the keynote address at University of Oklahoma, Price College of Business Energy Institute annual Energy Symposium Thursday March 31, telling delegates from around the world quite firmly that “the end of fossil fuels is not on the horizon.”

The program was broad and deep, addressing topics from global geo-political issues to national energy policy to price differentials among producing regions and the logistics of getting molecules to market. In his keynote, Sieminski reflected that perspicacity. He provided a near-term outlook for crude-oil prices as well as supply-demand balance.

Since oil prices tumbled, the focus has been on oversupply, but Sieminski chose to focus on demand for the long-term view. “There are a billion people in the world without electricity. I have been to the slums of Mumbai. Those people deserve electric light and propane to cook. Those are basic human needs.” EIA data show that natural gas for power generation and crude oil for transportation and heating fuel are the most efficient and economical ways of meeting those needs in most regions.

While that outlook was heartening, the immediate focus for most energy executives is the current price of oil, and what the near-term prospects are for recovery in the hard-hit industry.

“We just revised our outlook for crude oil,” said Sieminski, “and we expect West Texas Intermediate crude to remain low, as compared to recent levels. The projected price for next year is $40 a barrel, which is down from $50 a barrel in our previous outlook. Also, the confidence band on that projection is very broad,” reflecting a high degree of uncertainty.

In seeking a glimmer of hope for the near term, Sieminski noted that inventory accumulation has decreased. “EIA believes that supply is still greater than demand, and that inventories are still building, but that the rate of that building has slowed.”

The turning point could be next year, at least in global markets. “It could take until the end of 2017 for the worldwide supply-demand balance in crude oil to come back to some balance,” said Sieminski.

That said, he also suggested some leading indicators. “If that happens, then about six months prior to the physical markets coming back to balance, the financial markets will start to react. That means that about this time next year we could start to see some indications.”

EIA data show that North American oil production is falling by 500,000 barrels a day, but also that OPEC production is growing. Sieminski is not looking for big new liftings from either Iran or Iraq. “They are starting to top out in terms of current production. Iran will get a bit of a bounce from the lifting of the sanctions, but they will have trouble attracting capital,” to increase production further.

The other country to watch is Venezuela, he advised. “If you are looking for a geo-political challenge, then it could be Venezuela. Their production is 3 million barrels a day, of which 800,000 barrels a day comes to the U.S., mostly heavy sour crude to the big Gulf Coast refineries.”

Sieminski noted that there is a good deal of potential production held back in the U.S., wells drilled but not fractured, but cautioned that bringing those barrels to market would not be a matter of flipping a switch. Indeed he stressed capital destruction in the U.S. oil patch. “There will be $200 billion in assets written down this year, and over the long term, debt to equity ratios are rising while return on equity is falling.”

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