Why peak oil demand is already a major problem
Oil demand has to do with how much oil we can afford, Tverberg writes, and many of the developed nations are not able to outbid the developing nations when it comes to the world’s limited oil supply.
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We are dealing with is close to a zero-sum game, when it comes to oil supply. The amount of oil that is extracted from the ground is almost constant (very slightly increasing for the world in total). If prices stayed at the low level they were in the past (say $20 barrel), there would not be enough to go around. Instead, higher prices redistribute oil to countries that can use it manufacture goods at low overall cost. Workers in factories making these goods are then able to afford to buy goods that use oil, such as a motor scooter.Skip to next paragraph
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The substitution of natural gas for oil combined with increasing fuel economy means oil demand is approaching a tipping point.
This is out-and-out baloney, for a number of reasons:
1. There are way too many of “them” compared to the number of “us,” for energy efficiency to make even a dent in our problem.
2. When we look at past oil consumption, changes in vehicle energy efficiency did not make a big difference.
3. Substituting natural gas for oil still leaves cost levels for the US, Europe, and Japan very high, compared to those for the rest of the world, where little energy is used.
4. There are really separate markets in many parts of the globe. Our market is collapsing because of high price. Perhaps increased efficiency and natural gas substitution will help low-cost producers until they reach a different limit of some sort.
Let’s look at these issues separately.
There are way too many of “them” relative to us, for energy efficiency to even make a dent in our problem.
If we look at world population, this is what we see:
Using a ruler, we could probably make fairly reasonable projections of future population for each of these groups.
If we look at per capita oil consumption for the two groups separately, there is a huge disparity:
Per capita oil consumption for the EU, US, and Japan group peaked in 1973–a very long time ago. In recent years, it has been drifting down fairly rapidly, just to keep up with a slight per capita rise in oil consumption of the Rest of the World. Even with recent changes, per capita oil consumption of the EU, US and Japan group is more than 4.5 times that of the rest of the world.
If cars were made more efficient, more people could afford them. The market for cars is unbelievably huge, compared to today’s market, if costs could be brought down. Furthermore, gasoline accounts for less than half of US oil consumption. Even if efficiency were improved to allow cars to use half as much fuel, it would save a little less than one-fourth of current oil consumption. How far would this oil go in satisfying the needs of 6 billion other people–and growing every year?
When we look at past oil consumption, changes in vehicle energy efficiency did not make a big difference.
If we look at per capita oil consumption in the US, split between gasoline and other oil products, we see that the big drop in oil consumption came from the drop in other oil products–that is the commercial and industrial part of US oil consumption.
The amount of fuel used for gasoline has stayed in the 10 to 12 barrels a year per capita band, since 1970, in spite of huge improvements in vehicle efficiency.
I recently wrote a post called Why is US Oil Consumption Lower? Better Gasoline Mileage? In it, I looked at the decrease in US oil consumption between 2005 and 2012. I concluded that the majority of the decrease in consumption was due to a drop in commercial use. Only 7% was due to an improvement in miles per gallon for gasoline powered vehicles.