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Page added on November 29, 2016

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From Peak Oil to Peak Oil Demand in Just Nine Years

Consumption

Peak demand for oil is the big new thing. True, the International Energy Agency, in the annual World Energy Outlook it released earlier this month, didn’t envision a peak coming before 2040 barring a big acceleration in anti-climate-change efforts. But at least it’s talking about the possibility, and forecasting a slowdown in demand growth in the meantime.

Others think the big day is coming much sooner. Simon Henry, the chief financial officer of Royal Dutch Shell, recently predicted a demand peak “between five and 15 years hence.” And as Bloomberg’s Javier Blas and Laura Blewitt pointed out last week, even the IEA thinks that demand from passenger cars, long the biggest users of oil, has already peaked.

So that’s pretty exciting! The peaking of oil demand would mark a major historic turning point. Still, it’s impossible not to get a little wary when the words “peak” and “oil” are thrown together. Here, for example, is something I wrote nine years ago, when concerns about “peak oil” (meaning peak oil supply) seemed to be migrating from the apocalyptic fringe to the mainstream:

The chief executives of ConocoPhillips and French oil giant Total both declared that they can’t see oil production ever topping 100 million bbl. a day. The head of the oil importers’ club that is the International Energy Agency warned that “new capacity additions will not keep up with declines at current fields and the projected increase in demand.”

What happened to make these worries go away? The biggest thing was a global economic downturn in 2008 and 2009 that threw off everybody’s demand forecasts. But increases in oil supply — notably in the U.S., where crude-oil production went from 5 million barrels a day in 2008 to 9.4 million barrels a day in 2015 — have played a big role, too. World oil production is currently at 97.2 million barrels a day (up from 85.6 million barrels a day in 2007), and could surely go higher if demand were higher.

That makes me wonder what could go wrong with the forecasts of peak oil demand, or just slowing demand growth. The baseline IEA forecast is something called the “new policies” scenario, which assumes that governments around the world will follow through with current pledges to reduce carbon emissions and increase the use of renewable energy. Here’s how that scenario breaks down for oil demand:

Some Oil Uses Are Peaking
Oil demand, in millions of barrels a day
Source: International Energy Agency
* Includes agricultural uses, lubricants, road surfacing

The “passenger vehicles” category in this chart includes motorbikes and buses, which the IEA expects to need more fuel in 2040 even as passenger car demand declines by 600,000 barrels a day. The main demand gains foreseen by the IEA are from the petrochemical industry, aviation, and the trucks, trains and ships that move freight around the world.

The most obvious risk to this scenario is an unraveling of the global effort to reduce carbon emissions, the chances of which have clearly risen with the election of Donald Trump. The IEA actually has a “current policies” scenario that more or less covers this possibility, with oil demand rising from 93.5 million barrels a day in 2015 to 117 million barrels a day in 2040 (versus 103.5 million barrels a day in the new policies scenario), with no peak in sight. That would be great news for oil producers, but rising oil prices — not to mention rising global temperatures — could make it pretty complicated for everyone else.

But there are also risks in the other direction that could make the demand peak arrive sooner, and more abruptly, than the IEA and maybe even the people at Shell expect. The IEA actually has a “450” scenario that envisions world oil demand falling to 73.2 million barrels a day by 2040 if governments around the world succeed in “limiting concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2.” But I’m thinking more of forces that don’t require major breakthroughs in global governance.

Global trade has already plateaued, and the rise of nationalist politicians such as Trump would seem to make outright declines in trade at least as likely as a big rebound, thus depressing freight and maritime demand for oil. Because of the trade slowdown and other issues, the emerging-market countries expected to drive future oil demand growth may not be able to drive it all that fast.

In the same vein, improvements in electric-vehicle technology, coupled with continuing changes in how we get around — from ride-sharing services to self-driving cars — could depress passenger-car fuel demand even more than forecast. And the IEA, which has repeatedly underestimated the growth of renewable energy sources such as wind and solar, may be doing so yet again.

Energy market forecasting is hard. I certainly couldn’t say with confidence what’s going to happen next for oil. But I do have a suspicion that it could be really interesting.

bloomberg



18 Comments on "From Peak Oil to Peak Oil Demand in Just Nine Years"

  1. dave thompson on Tue, 29th Nov 2016 1:13 pm 

    I love the “peak demand” narrative of industrial civilization. Because corporate capitalism is dependent on endless growth “peak demand” sounds so free market like. Forget depletion, global warming, the destruction of the planets ecosystems, “peak demand to the rescue. WE can now rest easy it all is explained move along nothing to see just “peak demand”.

  2. penury on Tue, 29th Nov 2016 1:27 pm 

    I really thing Dave, that the thought of “Peak Demand” would be a rather sobering thought, energy sources may be changeable (to a degree)however the demand side is limited to humans. Every nation (developed) requires an increase in their GDP every year to supply services to the population and to service the debt which has been generated creating this demand, Now spend a few moments really thinking about what decreasing demand for liquid fuels will mean to the people not the gov or corporations. Decreasing demand, check. Increasing population, check Unicorns and skittles for all? In your dreams.

  3. Bob Inget on Tue, 29th Nov 2016 1:30 pm 

    I defy readers to name all the wasteful energy intensive wars currently in ‘progress’. (without looking)

    Now everyone, by now knows about Afghanistan.
    (15 years and counting) how about others?

    https://en.wikipedia.org/wiki/List_of_ongoing_armed_conflicts

    My point ? The oil burned destroying Yemen or Syria is entirely counter productive to economic growth. Agree? Then, why isn’t that wasted energy counted as consumption ?

    My point. Far more oil is being consumed then is generally accounted for.

    Saudi Arabia’s wells must stressed almost beyond repair supplying war’s motives and lubricants .

  4. Revi on Tue, 29th Nov 2016 1:39 pm 

    Peak demand? Could it be that we can’t afford it all any more?

  5. Truth Has A Liberal Bias on Tue, 29th Nov 2016 1:48 pm 

    The peak demand meme is pretty stupid. Retarded actually. As long as the human population continues to increase and as long as that population wants food and cars and condos and vacations and etc etc then the demand for energy will increase. Energy demand is met with with various sources but fossil fuel is king and oil, for as long as it lasts, will be king of kings.

  6. yoshua on Tue, 29th Nov 2016 3:05 pm 

    Art Berman’s calculation.

    http://www.artberman.com/permian-giant-oil-field-would-lose-500-billion-at-todays-prices/

  7. MD on Tue, 29th Nov 2016 3:13 pm 

    “peak demand” is just a simple acknowledgment of peak oil, from the flip side.

  8. yoshua on Tue, 29th Nov 2016 3:40 pm 

    Peak demand is demand destruction with a happy face.

  9. Dredd on Tue, 29th Nov 2016 3:56 pm 

    Peak demand for oil is the big new thing.

    Yea, we need more peaks. Wooo Hoooo peakish.

    Peak Yahoo00 !

    Let’s vote on it (Will Elections Cure The Disease? – 2).

  10. Hubert on Tue, 29th Nov 2016 4:51 pm 

    MSM leaking Peak oil info in small bits and sizes… Light bulb has to come on at some point for an average American Idiot.

  11. Sissyfuss on Tue, 29th Nov 2016 7:35 pm 

    Sorry, Hub but for the typical American idiots I know the only light coming on for them is the one in the fridge when they’re reaching for another brewski.

  12. brough on Wed, 30th Nov 2016 4:25 am 

    Its difficult to see what can learnt from yet another ‘peak demand’ article. Only that Bloomberg has come to the same conclusion as many other commentators on global energy matters, that IEA has lost all crediability and is completely out of touch of what is really happening to western civilisation. The head of IEA is Fatih Birol who believes in infinite global economic growth. Many governments are very rapidily coming to realise real growth is now history and are looking to other sources for future planning. IEA is yesterdays news and the sooner their funding gets pulled the better.

  13. .5mt on Wed, 30th Nov 2016 10:59 am 

    Everyone but us Is deh stupid. We know! We are special, each in our nutty little doom-hut way. It’s going to rain somewhere tomorrow d00ds, so take cover, load and lock.

    Lol, bunch of nutz, srsly, grips are cheap, buy one.

  14. mx on Wed, 30th Nov 2016 11:54 am 

    Funny, if you see auto’s moving to the electrical solution, you’re also going to see it in Trucks, Buses, Ships and finally Planes. But, it is hard to predict geometric growth, esp. is the growth is a bit less than geometric.

    Because Trucks and Buses in commercial use would SAVE A FORTUNE in fuel cost, and lower maintenance costs. Fleet Operators would save a fortune.

    But, typical Exxon “predictions” of Linear growth are far more ludicrous.

  15. Go Speed Racer on Wed, 30th Nov 2016 12:52 pm 

    ”Peak Demand” it’s how to be a liar
    by butchering the English Language.
    Just like Hillary’s “Undocumented Immigrants”.

    The truth is, as oil runs out, the spin liars
    will repackage it — to tell the steeple they
    didn’t want it anyway.

    You could do the same with starving Ethiopians.
    Tell them ‘food is obsolete, you don’t really want
    any food, there is no more demand for food’.

  16. dave thompson on Wed, 30th Nov 2016 1:47 pm 

    MX; here is a great expatiation as to why there will be no transition to electric trucks, buses and the like.https://youtu.be/-EKmNgvUw3k

  17. claes rydeman on Wed, 30th Nov 2016 2:09 pm 

    This is what it takes to get an article in peakoil. The final remarks:
    “Energy market forecasting is hard. I certainly couldn’t say with confidence what’s going to happen next for oil. But I do have a suspicion that it could be really interesting.”

  18. rockman on Wed, 30th Nov 2016 7:07 pm 

    Revi – “Peak demand? Could it be that we can’t afford it all any more?” Feel free to peruse my f*cking smart ass response in the Fox thread above. LOL.

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