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Oil demand peaks beyond 2050

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Any long-term oil demand projection rests on understanding transport demand, which today comprises 54% of global oil consumption. In their base case, BofA Merrill Lynch Global Commodity Research analysts expect that growth in transport demand will continue to more than offset fuel efficiency gains and substitution to alternatives.

“As such, peak global oil demand lies beyond 2050, as long aswe remain in a relatively low oil price environment of $55-75 per barrel in real terms. Yet, more rapid electric vehicle adoption or fuel efficiency improvements, e.g., due to higher oil prices, technological breakthroughs or severe policy changes, could alter this path and push peak global oil demand as near as 2030,” according to BofA Merrill Lynch.

Transport demand in EMs drives global oil demand

“World population currently stands at about 7.3bn people and is set to rise by another 2.5bn by 2050, almost entirely driven by EMs. High population growth combined with low car penetration sets EMs up for expanding transport demand for several decades as incomes rise rapidly.

“In China, car penetration rates rose tenfold in the last decade, and India stands ready to take over. India has just 1/5th the car penetration of China and, by the end of the decade, itwill also have the world’s largest population. Overall, global transport demand will undoubtedly keep growing in decades ahead, on ongoing trends of rising global population, urbanization and motorization. The impact on oil demand, however, also depends on efficiency gains and substitution to alternative vehicles.”

12 Comments on "Oil demand peaks beyond 2050"

  1. penury on Sun, 29th May 2016 10:07 am 

    Past performance is not an indicator of future performance. An old joke used to be “how do you know when Economists are lying?” They use decimal points. Same with all other prognostications, This author appears to have as little knowledge as I have.

  2. Plantagenet on Sun, 29th May 2016 10:13 am 

    The Bank of America can’t predict what is going to happen in the oil market 1 year from now, much less 35 years from now.


  3. Davy on Sun, 29th May 2016 12:43 pm 

    “China Default Chain Reaction Threatens Products Worth 35% of GDP”

    “The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China.”

    “The trend has China watchers worried. For starters, it means that bad investments by one WMP could infect others, causing a loss of confidence in products that play an important role in bank funding. It also suggests WMPs are struggling to find enough good assets to meet their return targets. In the event of widespread losses, cross-ownership will create more uncertainty over who’s vulnerable — a key source of panic in 2008 when soured U.S. mortgage securities triggered a global financial crisis.”

    “Issuance of WMPs, which are sold by banks but often reside off their balance sheets, exploded over the past three years as lenders competed for funds and fees while savers sought returns above those offered on deposits. The products, which offer varying levels of explicit guarantees, are regarded by many as having the implicit backing of banks or local governments.”

    “We’re starting to see layers of liabilities built upon the same underlying assets, much like we did with subprime asset-backed securities, collateralized debt obligations, and CDOs-squared in the U.S.,” Charlene Chu, a partner at Autonomous who rose to prominence in her former role at Fitch Ratings by warning of the risks of bad debt in China, said in an interview on May 17.

    “The industry’s ability to meet its return targets thus far may overstate its stability. The most common source of funds for repayment of WMPs is the issuance of new WMPs, Fitch analysts Jack Yuan and Grace Wu wrote in March. That leaves the products vulnerable to any sudden drop in demand, a risk alluded to in 2012 by Xiao Gang, then chairman of Bank of China Ltd., when he warned of “Ponzi scheme” dangers for the industry.”

  4. Boat on Sun, 29th May 2016 5:15 pm 

    “The impact on oil demand, however, also depends on efficiency gains and substitution to alternative vehicles.””

    The rise of electric cars will cause peak oil before 2050. More like 2030-2035.

  5. penury on Sun, 29th May 2016 5:44 pm 

    Davy, I think the discussion of financial instruments may be too esoteric in nature for most. It would be much easier to understand if we just said “every bank and other entity owes more money than they can repay.

  6. makati1 on Sun, 29th May 2016 5:57 pm 

    Boat, you will not be driving any car in 2030. Electrics are toys for techie wannabees, NOT a practical solution to energy. After all, they run on electric produced by burning hydrocarbons. They are made with hydrocarbon energy. And every one adds heat to the hot world we already live in. Heat will be you major problem soon. Food, potable water and shelter will be your only goals.

  7. dooma on Mon, 30th May 2016 5:37 am 

    penury, thanks for the very funny post at the start.

    It really made my day.

    Oh and I love the comment in the article “High population growth combined with low car penetration sets EMs up for expanding transport demand for several decades as incomes rise rapidly.”

    Yes, I am expecting a $20 an hour wage rise any day now…..

  8. Davy on Mon, 30th May 2016 6:24 am 

    I am indicating places where systematic risk is multiplying and beginning to tear apart the global economy. China is the focal point of debt instability with a direct relationship of the rest of the global currency complex. It is this destabilization that will never be corrected. We have gone too far into a zone of no return for the economy and a healthy growth dynamics to return.

    All of us know what dysfunctional lives are. We see people with drug or alcohol problems rip their lives apart in slow motion. We have something like this in the economy. It is the boring and esoteric that is going to get us probably not the drama many here want to see. It is a slow bleeding to death. This is likely more important short term for our survival than any of the peak oil dynamics and or climate instability. These are playing out over a slightly longer period. They are all of course related and influence each other. Peak oil issues and climate change issues just make the economy less durable.

    It is the economy that is absolutely necessary to produce and distribute a vast array of modern goods and services that keeps a global population in overshoot alive. Each and every local all of us here are in will become uninhabitable as we know it with an economic breakdown. The when of economic breakdown is an unknown. We are in the process. It is a process that confidence plays a big part in. Competitive cooperation is still working to keep us producing and distributing in trade and exchange of mutual wealth.

    For how long is a strange question. We have been habituated to a constant of modern civilization. Maybe if we would have had a major disruption recently like the great depression and WWII we would not be so lost in our modernism. We likely don’t have much time with the economy and it will likely be the economy that causes a collapse spiral.

    The reason for this is hyper integration, specialization, and dispersion of globalism. Combine that with delocalization of everyone’s local and you get helpless creatures inhabiting a landscape dependent on the tentacles of a global system that is far beyond its sustainability. This is true of the poorest and the richest. No one is safe. Even those detached from this madness have to wonder about a breakdown of things like Nuk energy. Subsistent farmers would have to worry about migrations of desperate people from large cities.

    The economy holds the key to this immediately. It is the immediate danger and the one many here discount. They want to look towards traditional risks as the real danger. These and other risks could be immediate but they are events not processes. The economy is one of those processes that is unraveling. A process has a time line that will end in an event. The economy is a process that is the most near term collapse risk with the least amount of understanding. This is why every chance I get I highlight what is happening with the economy.

  9. Davy on Mon, 30th May 2016 6:52 am 

    This is important for people like Makati Bill to read when they want to talk up China’s foreign reserves. These foreign reserves are not what people here want to think they are. They are dissipating quick along with china’s economy.

    “China Sends Yellen Another Warning, Fixes Yuan At Lowest In Over Five years”

    “round two of China capital outflows is about to begin, if second half last year was considered the first round. This is what he believes will happen next:
    China’s FX reserves may fall below $2t in about a year
    Downward pressure on FX reserves is most likely to be underestimated as short-term speculative flows are far more ready to leave than real flows
    Based on estimates, about 49% of PBOC’s FX reserves are made up of flows which are speculative and short-term in nature
    Expects decline in FX reserves to be more rapid in next 24 months at least
    Look for further $500b decline to $2.7t by end-2016 and a further $900b decline to $1.7t by end-2017
    If companies, especially SOEs, face trouble paying back creditors, central government would bail them out
    Massive bailouts would require government’s monetary policy to turn a lot more aggressive, putting more pressure on yuan
    Policymakers would have to seriously think about letting CNY slide gradually to a better equilibrium level
    His conclusion: the USD/CNY will hit 7.50 by end-2016, some 15% higher than where it is now.”

  10. onlooker on Mon, 30th May 2016 7:19 am 

    And yes and I think we can all reasonably conclude that a fall of the US would bring about the fall of China and vice-versa. And either of these scenarios would crush the entire world economy.

  11. Wolfie52 on Mon, 30th May 2016 8:59 am 

    “The Bank of America can’t predict what is going to happen in the oil market 1 year from now, much less 35 years from now.


    Brilliant! “Plant agent” with a few more wits you’d be a half wit…please lose the skeleton…every time I see it I know there will be some insipid comment.

  12. Davy on Tue, 31st May 2016 11:39 am 

    “$50 Oil Doesn’t Work”

    “$50 per barrel oil is clearly less impossible to live with than $30 per barrel oil, because most businesses cannot make a profit with $30 per barrel oil. But is $50 per barrel oil helpful? I would argue that it really is not.”

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