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Page added on December 15, 2013

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The trend to watch is peak car

Consumption

We all spend so much time looking at the dramatic changes on the supply side of the energy business that we risk overlooking the more gradual but equally important shifts on the demand side. To correct that its worth looking at some new work from the Transportation Research Institute picked up in the excellent Energy Collective blog.

The research shows that in the US – by far the world’s largest consumer of oil – transport sector demand is falling. This is not a temporary phenomenon driven by the economic downturn. This is a structural shift reflecting changes in life style and work patterns as well as gains in fuel efficiency.

And it is a trend which is continuing year by year. In summary “peak car” was in 2004 and since then Americans have owned fewer light duty vehicles, driven each of those vehicles less and consumed less fuel each year.

On each of these three measures the latest figures are lower than the figures for 1984 when the detailed survey work began. The study is part of a series of papers by Dr Michael Sivak all of which are worth reading.

What are the implications of this trend. First the work reinforces the prospect of total US oil consumption continuing to fall and advances the prospect of US self sufficiency as indigenous production of tight oil grows. Oil consumption is concentrated in transportation now and if that market is in decline it is bad news for refiners and all those with major downstream positions.

Then there are wider implications. Oil demand is also falling in Europe and Japan with long established trends which began well before the current recession. All that leaves the global oil market dependent on China and India. The Indian economy is faltering and the projections of an Indian economic miracle look very tarnished. China marches on but I have never believed that the Chinese want to allow themselves to become ever more dependent on oil imports.

Car numbers and oil use in both countries will grow but the projections of demand growth which suggest that China and India between them will be importing 10 or 12 mbd within 10 years begin to look like wishful thinking by the oil industry and the exporting countries. China is capable of limiting car numbers and enforcing ever higher fuel efficiency standards. India meanwhile will sets its own limits to growth because of weak Government, continued rural poverty and the ever simmering risk of ethnic conflict.

The combination of these factors will produce peak oil. Not a peak caused by any supply constraint – global reserve numbers continue to grow year by year despite production of almost 90 million barrels a day – but because demand will peak. When I wrote a few months ago that I thought global oil consumption would peak before 2020 at a level below 100 mbd several readers suggested, with different degrees of politeness that I was off my head. Maybe, but I will stick to my prediction.

As the detailed evidence is beginning to show the period of inexorable oil demand growth is coming to an end.

FT



4 Comments on "The trend to watch is peak car"

  1. paulo1 on Sun, 15th Dec 2013 11:44 pm 

    re:
    ” First the work reinforces the prospect of total US oil consumption continuing to fall and advances the prospect of US self sufficiency as indigenous production of tight oil grows.”

    ha ha. This is pretty funny. Sure, consumption will fall if the economy continues to sputter. Self sufficiency in bridges for sale, though. It won’t be in oil.

    Paulo

  2. BillT on Mon, 16th Dec 2013 1:30 am 

    Paulo, you are correct. By the time the Us is energy independent, it will be in the 3rd world and domestic use will be on the level of those countries, about 1/20th of current use.

  3. DC on Mon, 16th Dec 2013 2:45 am 

    Q/This is not a temporary phenomenon driven by the economic downturn. This is a structural shift reflecting changes in life style and work patterns as well as gains in fuel efficiency.

    What a crock. Its none of those things. Over half the trash-cans I see around me are ‘light trucks’ and over-sized ‘luxury cars’ bought on credit, that get terrible mpg. Trucks in Canada are like..10-15mpg, and some not even that good.

    ROFLMAO! The ‘life-sytle’ changes are also known as ‘unemployment’, or under-employment if your lucky. People arent driving less because they love the Earth, and drive Priuses, there is no place to go in market-totalitarian North Amerika(it all looks the same now anyhow), and less money to waste on driving around aimlessly.

  4. deedl on Mon, 16th Dec 2013 7:53 am 

    The whole demand side debate is plain nonsense. Every economics student learns that demand is not a single number but a function of the price. The demand function tells you how much is bought at which price. The price that influences the demand is where the supply curve and the demand curve meet. So if the supplycurve shiftes due to resource scarcity, the meetingpoint changes and price goes up and the traded (and consumed) amount goes down.

    Put shortly: peak demand is just a consequence of peak oil. Less oil available means less is bought.

    To attribute peak demand to “a structural shift reflecting changes in life style and work patterns as well as gains in fuel efficiency” is turning cause and effect up side down. People (especially young people loaden with colleg debt) change their life style and work patterns because they simply can not afford any longer to buy a car and commute 60 miles every day.

    If people would move away voluntarily from oil as the term “peak demand” implies, oil prices would actually move down and not up. Obviously that is not the case, so peak demand is the last “argument” to stick to for not having to admit that peak oil is real.

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