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Page added on October 28, 2013

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Peak Oil : A Look At “Peak Demand”


High value crude oil — the good stuff with 5.8 million BTU per barrel that we can make into diesel and gasoline and a million other things — has been generally holding on to a global production plateau since 2004. Global production will fall when the decline of mature fields overwhelms new additions. When, precisely, that will happen, no one can say for certain. But it’s almost definitely before 2020.
Most of the non-crude liquids are not equivalent to crude. Apart from tar sands and heavy oil, they contain less energy and are far less useful. Some of them can’t be made into gasoline and diesel. But with regular crude production trapped at around 75 million barrels a day, these other liquids must meet all future increases in demand for oil. As they take an increasing share of the liquid fuel market, they gradually increase the price of ‘oil.’ Nothing on the horizon will change that.
Eventually, the price will become too high, and we’ll have ‘peak demand’ alright, but it will be primarily because of price, not efficiency gains, and will lead to economic contraction, not growth. (links in original quote) [1]


A twist on the “we’re not running out of oil” meme offered up by the fossil fuel industry cheerleaders as an attempt to minimize/trivialize concerns about a peak in oil production—with the problems we’ll then have to contend with—is the notion of “Peak Demand.” Prompted at least in part by the decline in oil consumption in developed nations over the past few years, the cheerleading squad has seized on that fact, mixed in some arguments about increased fuel efficiency and some very optimistic projections about converting transportation fleets from oil to natural gas, and presto! Peak demand has rid us of energy supply concerns before most citizens knew supply was an issue.

And now the factual part of our discussion….


I pretend absolutely no expertise in economics, and am seriously math-challenged to begin with.  But even I know that when the supply of a product or service is diminished for whatever reason, the price will rise to some sort of equilibrium point satisfactory to buyer and seller. For all the Happy Talk about the boom in fossil fuel production of recent years, thanks in very large part to technologically-impressive fracking, the reality is that the conventional crude oil fields we’ve all relied upon as our primary sources are and will continue to decline. Finite resources used over time eventually do that because they are … finite! What a concept….

So the industry has resorted to fracking, and tar sands mining, and deep-water exploration to keep our supply numbers afloat. We’ve also gotten a lot more liberal about what constitutes “oil production.” Adding in butane and propane and their brethren pumps up the numbers, but I’m not seeing a rush of butane gas stations popping up in my town. They serve a purpose, but they do not come close to serving as adequate substitutes for the conventional crude oil that powers 90% of our transportation.

So while fuel efficiency is admirably on the rise (Chris Nelder once again offered invaluable analysis on just how much—little, actually—fuel efficiency for new vehicles has contributed to the decrease in demand/consumption over the past 8 or 9 years), the higher prices needed to sustain the production boom has been the real cause of demand decline. The contributions of the recession itself isn’t helping.


So while we’re currently supplying enough to meet our needs now, at these higher prices, we’re able to provide that supply because of … higher prices—the same higher prices that causes consumers to curtail their spending. And the other end of that Econ 101 stick is that if the prices of a product or service are too high, demand decreases and the price must head south to entice buyers back.

The fossil fuel industry can’t perform its technological feats of mastery if the prices are too low to cover their higher costs. How that all plays out seems fairly clear.

With estimates about demand increases issuing from respected bodies such as the International Energy Agency and the Energy Information Administration—along with projections from some of the major industry players like BP—we might want to ease up in our mad dash towards Peak Demand as a solution.

It’s a nice idea, but facts continue to suck the life out of most of the appealing ones.

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6 Comments on "Peak Oil : A Look At “Peak Demand”"

  1. Keith_McClary on Mon, 28th Oct 2013 4:50 pm 

    “… am seriously math-challenged … finite! What a concept….”

    Some people are so math-challenged they can believe something is finite and yet can increase without bound.

  2. poaecdotcom on Mon, 28th Oct 2013 5:10 pm 

    “Some people are so math-challenged they can believe something is finite and yet can increase without bound.”

    90% of economists and MBAs….

    And of course, most of those that advise our leaders..

  3. Dave Thompson on Mon, 28th Oct 2013 6:17 pm 

    “Peak demand” is new technospeak of the oil age. Divisive by nature, the overlords of industry are glossing over the infinite grow like there is forever model. People, realize, less can afford, less is produced = PEAK OIL.

  4. shortonoil on Mon, 28th Oct 2013 8:44 pm 

    “When, precisely, that will happen, no one can say for certain. But it’s almost definitely before 2020.”

    Fredrik Robelius probably has about the best take on this of anyone; when the Giants that supply 60% of the world’s crude come off their plateau.

    Ghawar, that supplies about 7-8% of the world’s light sweet, has a water cut of 45-55%. That gives it about a remaining 40 ft oil seam (350 ft originally). Once the WC reaches that level the production can drop very rapidly. Water break through is not far off.

    Robelius is predicting the decline of the giants to begin in the late teens, with at least an 8% decline rate. Looking at our numbers, he may be a little optimistic. Of course, one is always a little reticent about telling people that the world they have always known is about to change dramatically!

  5. BillT on Tue, 29th Oct 2013 1:21 am 

    NET energy, not barrels recovered, is the number to watch, but it is absent most ‘reports’. If it takes 3 barrels out of the first 10 to recover the next 10, it is really 7 barrels recovered, not 10. But, since we count moonshine and cooking oil as oil, delusion is maintained.

  6. Others on Tue, 29th Oct 2013 1:23 am 

    Yes Oil now contains 4 components.

    Liquid Crude Oil.
    Sands Oil which is solid oil.
    NGL which contains Ethane, Propane & Butane.

    Even though oil companies hate Bio-fuels, they want to include it in Oil supply.

    This is pure fraud.

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