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Page added on April 10, 2017

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Is peak oil demand for real?

Consumption

Standing at the front of a windowless room in downtown Washington last week, the Swiss energy economist Christoff Frei lectured on how the world’s energy sector is about to undergo an upheaval the likes of which has not been seen in a century.

Between the insurgence of electric cars, climate change policy and a host of economic factors, Frei posited the world’s thirst for oil might well peak within the next decade as society gets more and more of our energy from the power grid.

“Electricity is the new oil,” he quipped.

Asked what he was seeing that organizations including the International Energy Agency and Exxon Mobil are not, Frei, who was recently named secretary general of the inter-governmental group World Energy Council, turned coy.

“They do quite a wide range of scenarios,” Frei said. “But don’t quote me on IEA scenarios.”

Peak oil demand theory has quickly become the conversation du jour within the world’s energy corridors, following on from a surprise pronouncement by Royal Dutch Shell CEO Ben van Beurden in Houston earlier this year that their models showed demand potentially peaking as early as the late 2020s.

With so many companies and organizations offering different forecasts – or scenarios, depending on their confidence – predicting the world’s oil needs has become more a matter of art than science.

Economists like Frie argue that the long held correlation that with economic growth comes growth in energy demand is diminishing, as buildings and cars get more efficient and rapidly advancing digital technology allows humans to change their lifestyles. Think ride sharing instead of driving your own car or video conferencing instead of getting on an airplane.

Add in the growing shift to natural gas and improvements in renewable technology, and not only is oil’s market share shrinking but so is the market itself.

Yet the IEA, which has long served as a guiding light for the world’s oil industry, said last November that even with the Paris agreement on climate change oil demand would continue to rise through 2040 – mirroring predictions by the likes of Exxon Mobil.

Michael Lynch, a former researcher at the Massachusetts Institute of Technology who now runs the consulting firm Strategic Energy and Economic Research Inc., likens the buzz around peak oil demand to that around peak supply in the early 2000s.

At the time, Lynch drew angry criticism when he argued technology would ultimately win out and allow more oil to be accessed – as came to pass with the advent of hydraulic fracturing. Now, Lynch says, peak oil demand proponents are making too much of the impact digitization and renewables will have on energy demand.

“I was looking at air miles traveled, and the internet doesn’t seem to have made as much difference as people thought. It’s slowed a little in the U.S. but not in other places,” he said. “Let me ask you, When you saw this guy talk yesterday, was he present?”

What IEA is essentially counting on is that the trends of the oil industry’s entire existence – namely that energy consumption rises with economic growth – will continue. And with countries like China and India expected to grow their economies considerably in the decades ahead, it would make sense to assume they will need lots of energy to get there.

That isn’t proving out the way it used to, said Andrew Logan, director of oil and gas program at CERES, a nonprofit investment firm that advocates for corporate sustainability.

“IEA projections are always declining. Every year they have to notch it down. It’s pretty incredible they get it wrong year after year,” he said. “I don’t know the answer on when (oil demand peaks), but the way we look at it the future of energy is more uncertain than it’s been in a very long time.”

So why would a CEO like van Beurden openly discuss a decreasing demand for his product within the next decade when environmentalists are not entirely convinced the timetable is so short?

Lynch said he wasn’t sure, but he offered, “It sounds a lot sexier than we’re going to keep driving cars with gasoline and diesel for the next 30 years.”

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14 Comments on "Is peak oil demand for real?"

  1. rockman on Mon, 10th Apr 2017 3:23 pm 

    “Between the insurgence of electric cars (Insurgence? LMFAO!. In 2016 of the 84 million vehicles purchased globally EV’s “surged” to about 1.5 million), climate change policy (which has yet to decrease GHG production even marginally) and a host of economic factors…”(an unidentified “host of factors because they can’t list any),

    Recently the world has produced more oil then ever before in history. And every bbl was bought. Mosst by consumers. And a smaller volume by folks putting it into storage for later consumption: no one puts oil into storage who does not plan to sell it is consumers at a later date.

    Someday the world will reach PD. And on that date some owning oil will be unable to sell it no matter how low they price it. And that ain’t today and there’s no data that even hints it will happen in 10 years.

  2. Mark Ziegler on Tue, 11th Apr 2017 8:02 am 

    Who needs cars?
    https://www.youtube.com/watch?v=AffSRzZd__E

  3. Jan on Tue, 11th Apr 2017 12:03 pm 

    Airliners are more efficient, but not enough to make up for the large increase in passangers.

    http://www.iata.org/pressroom/pr/Pages/2012-12-06-01.aspx

    Also cars are becoming more efficient, but again nowhere near enough to make up for the huge increase in vehicles.

    http://uk.businessinsider.com/2016-was-a-record-breaking-year-for-global-car-sales-and-it-was-almost-entirely-driven-by-china-2017-1

    Up from 50 million to 88 million in 20 years.

    How much more efficient is a VW or BMW, if you believe their figures?

    There will be no peak demand until there is peak production.

    I cannot think of a single thing that humans have consumed and stopped consuming out of good sense. They only stopped when the thing was all used up.

    https://www.savetherhino.org/rhino_info/poaching_statistics

    http://www.conserve-energy-future.com/various-deforestation-facts.php

    http://www.inquisitr.com/3046643/world-will-run-out-of-fresh-water-in-2050-says-leaked-report-earth-faces-catastrophic-fate/

  4. Boat on Tue, 11th Apr 2017 8:41 pm 

    Jan

    Coal growth has been growing at 2.5 avg percent for the last decade. 2018-2019 is projected to be at .06 percent and reaching peak in 2021. We’ll know for sure in 4 years. The trend is obvious.

  5. GregT on Tue, 11th Apr 2017 9:31 pm 

    Boat,

    Not according to the EIA.

    EIA projects 48% increase in world energy consumption by 2040

    “Coal is the world’s slowest-growing energy source, rising by only 0.6% per year through 2040. Throughout the projection period, the top three coal-consuming countries are China, the United States, and India, which together account for more than 70% of world coal consumption. China alone currently accounts for almost half of the world’s total coal consumption, but a slowing economy and plans to implement policies to address air pollution and reduce carbon dioxide emissions mean that coal use in China will begin to decline in the later years of the projection period. Coal use in India continues to rise and surpasses U.S. coal consumption after 2030.”

    https://www.eia.gov/todayinenergy/detail.php?id=26212

  6. GregT on Tue, 11th Apr 2017 9:38 pm 

    I highly suspect that coal use will ramp up considerably as oil supplies become more problematic after around 2025.

  7. Boat on Tue, 11th Apr 2017 10:21 pm 

    Greggiet,

    We will see, the drop in the price of renewables per kW is something the always seems to project on the low side. That is what is driving renewable growth, price per kW.

  8. GregT on Tue, 11th Apr 2017 11:43 pm 

    Electric power generation makes up less than 20% of total global energy usage. Around 6% (other than hydro) of that 20% is from renewable sources, or .012% of total energy consumed. Without the other 80% of global energy usage (non electric), modern industrial society goes the way of the Dodo bird. No industrialism, no electric power generation, and nothing to use that electricity for.

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

  9. GregT on Tue, 11th Apr 2017 11:47 pm 

    “Without the other 80% of global energy usage”

    Assuming a 100% build out of electric power generation from renewable sources, which of course, is never going to happen.

  10. GregT on Wed, 12th Apr 2017 12:22 am 

    One more thing Boat,

    Price per kW? If you don’t understand even at the most basis fundamental level what you are talking about, the rest of your “argument” is nothing but nonsense as well.

  11. Boat on Wed, 12th Apr 2017 12:57 am 

    Greggiet,

    You call coal and nat gas non electric. Son you got some reading to do. Oil in the US is around 39 percent of btu use. The other 61 is won by the cheapest kW/MW. Even oil 15 years down the road will be under assault. You can’t see the Forrest fore the tree.

  12. GregT on Wed, 12th Apr 2017 1:21 am 

    “You call coal and nat gas non electric.”

    Coal and natural gas are not solely used to generate electricity.

    “Son you got some reading to do.”

    At least I can read, unlike you.

    “Oil in the US is around 39 percent of btu use.”

    See my last point above. I was talking about global energy usage. The US consumes ~18% of global energy.

    “The other 61 is won by the cheapest kW/MW.”

    kW and MW mean nothing without an element of time. Obviously you still can’t quite figure out why you are speaking nonsense.

    “Even oil 15 years down the road will be under assault.”

    Hmmm, Interesting… Under assault by whom? Putin and the evil Russian commies perhaps?

    “You can’t see the Forrest fore the tree.”

    Not entirely sure what this means. If you expect to carry out a coherent conversation, learn how to speak English.

  13. Craig on Tue, 18th Apr 2017 3:04 pm 

    I know that oil is a hot topic, and many question its use. Something that doesn’t get enough talk is fracking. We need oil, and fracking is great way to get it. It’s also not as bad as many think. See that here:

    http://www.greenandgrowing.org/fracking-pros-and-cons/

  14. onlooker on Tue, 18th Apr 2017 3:11 pm 

    No Craig, fracking in not a great way to get oil. It is expensive and energy intensive. Also as per your idea that it is not polluting, think again. https://www.scientificamerican.com/article/fracking-can-contaminate-drinking-water/
    The thing is lots of unconventional oil and gas exists and also conventional sources are becoming more scarce, so that is why we are doing the fracking.

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