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The World Is Millions Of Barrels Away From Peak Oil

fracking ops

The notion that demand for crude oil will soon peak has largely replaced the idea from a decade ago that crude oil production was about to peak for geological reasons. This new idea is that we will no longer need oil (or at least a lot less of it) because consumers will choose alternatives to oil.

But actual oil consumption numbers suggest that peak demand for oil won’t happen soon, and when it does happen it will do so at a demand millions of barrels per day (BPD) higher than current demand.

Proponents of peak demand expect that exponential growth in electric vehicles (EVs), and to a lesser extent an increase in biofuel production will send oil demand into permanent decline. In fact, nearly a year and a half ago Bloomberg suggested that at a continued annual growth rate of 60%, electric vehicles could displace two million BPD of oil by 2023. At a 30% growth rate, two million BPD would be displaced by 2025.

I addressed the key problem with the Bloomberg scenario here. In a nutshell, the article treated oil demand as stagnant, which resulted in the assumption that in 2023 the displacement would take place from current demand levels. In other words, if 2016 demand was 95 million BPD, the Bloomberg scenario presumed 2023 demand at 93 million BPD (and falling every year).

”The flaw in the scenario is that for over 30 years average oil demand has grown each year by more than a million BPD.” The flaw in the scenario is that for over 30 years average oil demand has grown each year by more than a million BPD’’ Over the past decade, oil demand has grown each year by 1.1 million BPD. Over the past five years, 1.4 million BPD. Last week the bible of energy statistics was released — the BP Statistical Review of World Energy 2017 — and it showed that oil consumption grew by 1.6 million BPD last year:



World oil demand 1965-2016.

”Oil consumption in 2016 represents a new all-time high in global oil demand” and occurred despite the fact that global EV sales grew at a 41% rate in 2016 to reach nearly 800,000 vehicles (Source: InsideEVs). The growth over the past decade also took place during a time that global biofuel production increased by over a million BPD. (I can recall many who suggested ten years ago that growth in biofuels would lead to peak oil demand). Related: Underperforming Energy Sector May Soon See M&A Wave

Underlying oil demand is growing for several reasons. The population is growing, the middle class is growing, automobile sales in developing countries are growing at a blistering pace, and the number of miles driven is reaching all-time highs.

The implications are clear with respect to the peak demand argument. While many proponents are pushing the notion that peak demand is imminent, growth in EVs thus far hasn’t even been able to slow down oil demand growth.

What peak demand will actually look like — assuming EV sales continue at exponential growth rates — is for oil demand growth to first slow down. What we may see is that in contrast to Bloomberg’s scenario of 2023 demand being two million BPD less than current demand, it might only be five million BPD higher than today’s demand (instead of seven, which assumes the growth rate of oil remains consistent). In fact, oil demand today is close to two million BPD higher than it was when Bloomberg made its forecast in February 2016.

The bottom line is that even in a best case scenario for EV growth rates, demand for oil rose by 1.6 million BPD last year, and it’s projected to increase by 1.4 million BPD this year. It will take a few years of rapid EV growth to halt the growth rate for oil, and what that means — and what many peak demand proponents don’t get — is that peak demand for oil is going to be millions of BPD higher than current demand, and it’s almost certainly going to take place beyond 2023.

By Robert Rapier

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Leave a comment
  • Jhm on June 25 2017 said:
    Peak oil demand will cause the price of oil to fall long before production enters permanent decline. Let that sink in for a moment.

    So the question is, at current low prices how long can the oil industry keep raising production over 1 mb/d each year? If production were to decline in a given year, is there really enough demand to raise prices high enough?

    If prices fail to rise high enough to keep growing supply, then consumption will indeed fall. This is the real threat of peak demand. It is firstly about price, not consumption.
  • Josh Gregner on June 25 2017 said:
    I agree that EVs will for the coming years not be able to move the needle. But I believe that fuel efficiency standards, emission policies, measures to safe energy, EVs + electric trucks will soon start to move the needle. We know that in OECD countries oil demand is stagnant/declining. What drives oil demand are China + India.

    And China is moving to an aggressive fuel efficiency system which requires a share of EVs to be sold. If China + India pivot, all will change. And right now it seems as if policy makers of both countries want to do that.
  • Nick on June 26 2017 said:
    EVs sales still aren't high enough to make much difference in oil sales, but it's a bit unfair to look at the 2016 numbers and point out how they didn't affect 2016 oil sales. The majority of the EV purchases came later in the year; Sept - Dec all had higher sales numbers then the best month previously, with by far the largest number being in Dec. which had nearly 3 times the number of sales of either Jan. or Feb. Those sales wouldn't affect oil sales in 2016 much at all - they came too late in the year to do so. They will affect sales in 2017.
  • Gavin J on June 27 2017 said:
    Well reasoned article. I'd also add the following obvious facts:

    1. EV vehicle buyers ignore the fact that coal and natural gas (fossil) fuels make up more than 70% of global electric power production. Thus, EV car owners are actually powering their cars with coal, which creates greater particulate air pollution than gasoline or diesel.

    2. The hoax that CO2 drives climate change, rather than the sun and other naturally occurring processes, will soon be widely accepted for the fraud that it is. This will kill EV sales.

    3. EV vehicles are only practical in locations that are warm year round and where drivers daily driving distance is short.
  • Gavin J on June 27 2017 said:
    Well reasoned article. I'd also add the following obvious facts:

    1. EV vehicle buyers ignore the fact that coal and natural gas (fossil) fuels make up more than 70% of global electric power production. Thus, EV car owners are actually powering their cars with coal, which creates greater particulate air pollution than gasoline or diesel.

    2. The hoax that CO2 drives climate change, rather than the sun and other naturally occurring processes, will soon be widely accepted for the fraud that it is. This will kill EV sales.

    3. EV vehicles are only practical in locations that are warm year round and where drivers daily driving distance is short.

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