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Page added on April 20, 2015
Oil Will Continue to Run the World
While all the buzz surrounds oil prices, the global demand side remains on solid footing: up. Supplying 33% of all energy, oil is the world’s primary fuel. Oil is so important that global demand is ever-growing: 67 million b/d in 1990, 77 million b/d in 2000, and 91 million b/d in 2014. I’ll never understand the animosity of some Westerners toward critical fuels that they depend on everyday, making their lives easier in ways their great grandparents only dreamed of. Oil, after all, is the reason the world is truly globalized. And it’s oil that takes a grandson living in Atlanta back home to Seattle for his grandmother’s funeral…the very same day he learned she passed.
1. More Cars, Trucks, Gasoline, and Diesel Fuel
Thanks to derivatives gasoline and diesel fuel, the ongoing dominance of oil in the rapidly expanding vehicle market just now reaching into developing Asia is about as sure a thing as we have in our energy/environment discussion today. If there’s ever going to be common ground between fossil fuel companies, liberals, conservatives, environmental groups, Al Gore, and the Koch bros, the anti-oil crowd HAS to get over that fact. The power of oil is simply overwhelming. There are now about 1.2 billion passenger cars alone, over 98% of them rely on oil. The fleet is expected to reach 2 billion by 2035 and over 3 billion by 2050, with developing Asia leading the way thanks to rising personal incomes. The numbers will make your head spin. This year, world vehicle sales will reach 89 million, a 37% increase since 2005 – amid the worst economic times since the Great Depression. The world consumes about 24 million b/d of gasoline and 27 million b/d of diesel fuel every day, a staggering 1.5 million gallons every minute. Like it or not, more oil is a numbers game. The U.S., for instance, has 82 cars per every 100 people; China has just 7. And India has just 4 cars per every 100 people…and 385 million kids under the age of 15 (re-read that last part!). Focused in heavy-duty vehicles, diesel could eventually surpass gasoline to become the number one transportation fuel worldwide, as commercial activity can only grow. When nations become more developed, their heavy-duty truck sales are tracked closely with changes in GDP. Despite noise and emission concerns since it’s less refined, diesel engines are also making headway in the passenger car market, offering up to 40% more efficiency.
And contrary to what we keep hearing, not even the rich U.S., easily the largest consumer in the world, is a saturated oil market (see here). Some 16.5 million cars were sold in the U.S. last year, about 120,000 of them were plug-ins, easily the largest electric vehicle market in the world. Truck and SUV sales, meanwhile, were over 8 million. In the U.S., vehicle stock can stay on the road for over 20 years. There are legal obstacles (see here), but that gas guzzler you thought disappeared but really just got scrapped to Mexico has broader potential. Used vehicles make up less than 20% of total car sales volume in China, for instance, compared to over 70% in the U.S. China is selling nearly new 25 million vehicles a year, and only 75,000 of them run on electricity. It’s certainly not for a lack of trying: each plug-in hybrid Chevy Volt sold in the U.S. has been supported by over $250,000 in government subsidies. Over a 10-fold advantage in energy density and highly established global infrastructure give gasoline especially the cost advantage over electric vehicles, a crucial consideration for the poorer nations now crashing the global vehicle market. Renewable Fuel Standards? The United Nations has asked the U.S. to suspend its RFS mandates because they exacerbate the global food crisis. In a world where a child dies from hunger every 10 seconds, “food for fuel” isn’t a solution.
2. 83% of the World Has Just Started to Consume Oil
The idea that the world has really just started to consume oil is one that is very difficult for some Westerners to accept. It’s easy to see why: we have all the oil that we need and want. Americans consume over 2.6 gallons of oil products every day, and there are 255 million oil-based cars in the country. But, most of the world doesn’t have it as easy as we do. A rising 83% of the world is undeveloped, and the transport demands for the poor are just now coming to light. The developed, OECD nations use 50% of the world’s oil but are just 17% of the population. The rich consume 1.6 gallons of oil products a day, while the poor consume just 0.32 gallons. Given the importance of oil, this five-fold disadvantage for the poor is indeed a moral issue: oil-dependent Westerners are the ones leading the anti-oil charge. Our hypocrisy just isn’t selling in the developing world, Mr. DiCaprio (a must read). Why would it? Poor people wanna be rich too. From 2010-2030, the poor nations are projected to add 800 million new registered vehicles.
After vehicles, the second emerging oil market to watch could be jet fuel. Boeing affirms that commercial aircraft in the world will double to over 40,000 by 2032, with Asia-Pacific becoming the focal point of aviation. Jet fuel demand in the region has more than doubled to over 2 million b/d since 2000. A key reason why we have seen horrific crashes in Asia recently is demand surging faster than pilot training. Indeed, twinned with electricity, oil is the cornerstone of modernity where more demand indicates higher standards of living.
More Oil Use Signifies More Human Development
Source: EIA; CIA
3. “Price Inelasticity of Demand”
One could argue that the most dangerous push in our energy/environment discussion is that which seeks to stop/limit oil production and/or divest from oil companies. That’s because our primary fuel has nowhere near a significant substitute. As such, publicly-traded oil companies are the lone bastion between us and a complete reliance on OPEC. From the fuel in our cars and planes, to the petrochemicals that comprise our clothes and basic necessities, to the power in trucks and locomotives that move windmills and solar panels…oil is all around us. Unfortunately, with two distinct functions in the economy, the misperception that more wind and solar (used for electricity) will displace oil (used for transport) feeds an ignorance that hinders sound energy policy. The U.S. Congress, after all, is filled with lawyers, not engineers. The lack of material substitutes defines oil’s low price elasticity of demand. Fortunately, the Society of Petroleum Engineers reports that of the 9 trillion barrels of oil in place globally, only 12% (1.1 trillion barrels) has been extracted.
Finally, my fellow Americans, a reality check on our importance. We are an “increasingly shrinking fish in a fast-growing pond becoming a lake.” Through 2040, the International Energy Agency’s reference forecast 2014 has U.S. CO2 emissions actually declining 20%, while global emissions expand by 6.1 billion tonnes. Looking forward, we can help in a number of ways by encouraging: cooperation in production, pipeline development, more efficient vehicles, better fleet turnover strategies, more market-based pricing, better city planning, and less oil in power generation.
The “Price Inelasticity” of Global Oil Demand
Source: EIA, IEO 2014 (National Energy Modeling System)
25 Comments on "Oil Will Continue to Run the World"
Davy on Mon, 20th Apr 2015 5:57 am
Article said “Thanks to derivatives gasoline and diesel fuel, the ongoing dominance of oil in the rapidly expanding vehicle market just now reaching into developing Asia is about as sure a thing as we have in our energy/environment discussion today.”
WTF kind of word salad is that? I mean Davy doom has some good word salad but that takes the cake.
Article said “There are now about 1.2 billion passenger cars alone, over 98% of them rely on oil. The fleet is expected to reach 2 billion by 2035 and over 3 billion by 2050, with developing Asia leading the way thanks to rising personal incomes.”
WTF kind of talk is that? I want to know where all this stuff is going to come from. Where are they going to put the roads? How the hell could an editor with half a brain allow this?
Article said “Finally, my fellow Americans………..Looking forward, we can help in a number of ways by encouraging: cooperation in production, pipeline development, more efficient vehicles, better fleet turnover strategies, more market-based pricing, better city planning, and less oil in power generation.”
Please…..give me a friggen break and stop insulting my intelligence. Was that conclusion some mojo or what? This is what the corns are offering Marmi? That is some fluffy cotton candy misplaced hopium if I ever heard some!
rockman on Mon, 20th Apr 2015 6:05 am
Davy – I usually see things your ways. But you seem to be implying this writer is advocating such a future of oil consumption. OTOH I see him just emphasizing the reality of the situation. Granted that reality will exist just so long but do you disagree that this isn’t the well established current consumption path we’re on?
Kenz300 on Mon, 20th Apr 2015 6:15 am
Forbes — spokesman for the fossil fuel industry and the top 1%………….
Fossil Fuels Just Lost the Race Against Renewables
http://www.renewableenergyworld.com/rea/news/article/2015/04/fossil-fuels-just-lost-the-race-against-renewables
Davy on Mon, 20th Apr 2015 6:47 am
Rock, I see zero chance of another BILLION vehicles on the road by 2035? That is what this article renders down to. That is just ludicrous talk considering all we know about POD, resource depletion, and land development possibilites. Trends point that way but are trends reality?
Lawfish1964 on Mon, 20th Apr 2015 7:31 am
“I’ll never understand the animosity of some Westerners toward critical fuels that they depend on everyday, making their lives easier in ways their great grandparents only dreamed of.” It’s the thought of being a great grandparent and having to explain to my great grandchildren why they inherited a ruined environment and we used all the oil without saving any for them. We will be seen in the future as the most profligate, self-centered, thoughtless pigs history has ever known.
shortonoil on Mon, 20th Apr 2015 7:32 am
In the year 2000 the economy could have afforded to pay $145 for a barrel of oil. In 2015 that has now fallen to $77 dollars per barrel. At least a third of the world’s producers are now operating below their cost of production. With production cost continuing to rise, and consumer affordability continuing to fall the future of oil is not very bright. In a desperate attempt to maintain production the world’s producers are adding mountains of new debt to their existing debt structure, or they are selling assets to raise funds. Implying that the world will be producing an additional 20 or 30 mb/d without explaining how it will be paid for is mere conjecture. It is nothing more than one more item in a wish list; a pumpkin that can turn into a carriage, and a pair of golden slippers.
http://www.thehillsgroup.org/depletion2_022.htm
eugene on Mon, 20th Apr 2015 7:58 am
I think the article is right on. Whether we have exactly as the article states is, somewhat, immaterial. We are going to run this thing to the bitter end and, actually, there isn’t any choice. The energy focused people have their “renewables will save us” and the climate change people have their “go local”. When I’m scared I start hoping for someone or something to save my sorry ass too. We started this oil run many decades ago and are way, way too far down the trail to stop.
So take a deep breath, face reality and learn to cope with the fear deep in your gut.
paulo1 on Mon, 20th Apr 2015 8:08 am
And it’s oil that takes a grandson living in Atlanta back home to Seattle for his grandmother’s funeral…the very same day he learned she passed.
Yes it is, and is it realistice or the way things should be for a good and fulfilling life? Or, is it another form of instant gratification. I submit that if Grannies life is so important, then perhaps it is better to live closer to family and not have to take a jet to the funeral. Come on.
Or as it is written by the ‘Stones’, “No, you can’t always get what you want
aaaahhwaw
No, you can’t always get what you want
aaaahhwaw
No, you can’t always get what you want
aaaahhwaw
But if you try sometime, you just might find
You get what you need”
rockman on Mon, 20th Apr 2015 8:50 am
Davy – “Trends point that way but are trends reality?” And that’s how I took the article: tremendous pressure to follow those trends. But that doesn’t mean the tends will persist. But the effort will be made which will inevitably lead to more instability and strife/violence in the world. That’s the meaning I took away from the piece: not that of will happen nor that it should happen. But that the desire for it to happen will not disappear. I don’t see anything that really represents a “cheerleader” spin per se in the article. Or do you think mankind will suddenly wake up one day and become rational? That doesn’t sound like you. LOL.
Lawfish – I take it the animosity refereed to as from folks who are consuming as much fossil fuel as they can afford…like the overwhelming majority of Americans. In simple terms I see him referring to the hypocrisy of those who express opinions such as you rightfully do but at the same time are closet unrepentant consumes of fossil fuel. We even have a few here that I suspect fall into that category. Some folks might resent hearing the truth but it doesn’t make the situation any less true.
Paulo – “But if you try something, you just might find you TAKE what you need.
Depending how one assigns cause and affect more than 100 million people died in the last century over conflicts centered on controlling natural resources. Has mankind changed that much? Based upon what we see happening in the Middle East today it doesn’t seem likely. We sit back many decades removed and wonder how folks in last century missed the signs of the dark future ahead of them. And yet today many label such folks as alarmists as doomers and tin-foil hat wearers.
Davy on Mon, 20th Apr 2015 9:11 am
I agree Rock, BAU has no other choice but to follow that trend. BAU is fundamentally a car culture with the developing world moving that direction in a big way.
steve on Mon, 20th Apr 2015 9:14 am
They have to sow these stories in every so often to keep panic from happening…the stock market down 279 on friday and back up 200 points today? But yet I am the wacko for pointing out the incongruities of the system?!! can anyone tell me about the Mall Wart closings? seems strange….
Davy on Mon, 20th Apr 2015 9:55 am
Steve, without normal market fundamentals today’s market is ALGO HFT driven with plenty of emotions from what is left of the human element i.e. traditional investors.
Years ago how often would you see swings like you described. Now they are normal and follow increasingly manipulated patterns. It is well known that the whole game is rigged. That said you can’t rig panic. If and when we get a healthy dose of panic “Katie bar the door”
gdubya on Mon, 20th Apr 2015 10:15 am
Rock, I agree that this is extrapolation but the graph that shows Americans using twice as much oil as Europeans and Japanese for the same “human development index” seems to be cheerleading. That graph does not point out that the USA leads those other developed nation in incarceration, inequality, infant death, obesity, rates – hardly a glowing recommendation for using twice as much fuel as ‘necessary’ to live a first-world life.
And when we seem to be seeing the effects of climate change having only burnt 12% of the petroleum this might explain this westerner’s animosity towards critical fuels.
Yeah, it has been great living like a sultan all my life. But now we are aware of the ecological costs if this profligate lfiestyle it is a shame that the only animal with foresight is unable to alter this trajectory.
rockman on Mon, 20th Apr 2015 10:26 am
gdubya – Yes is does to a degree. I suppose it’s how you view the goal of the piece: is it to make you believe it’s a possibility or to warn you of the drive (at any cost) to reach such a goal? Maybe because I prefer to offer what I see as the likely (yet foolish) approach the world will take going down the PO path even if that path has little chance of succeeding. Often times some folks take such predictions of mine as advocating those dynamics. But just because I predict matters following a certain route (such as burning more coal as other fossil fuels become scarce) doesn’t mean I support such efforts. I just readily accept that much will happen that I don’t feel is justifiable.
BobInget on Mon, 20th Apr 2015 10:40 am
Ya can’t even run-a good war with-out oil.
Except for one or two years after the Berlin Wall
came down the US has been at war almost constantly since 1941. IOW’s being at war, cold or hot, is The American Way.
Being anti oil/war is like being anti American.
Do you believe? Today is the fifth anniversary
of the BP Macondo GOM disaster.
Wikipedia:
The Deepwater Horizon oil spill (also referred to as the BP oil spill, the BP oil disaster, the Gulf of Mexico oil spill, and the Macondo blowout) began on 20 April 2010 in the Gulf of Mexico on the BP-owned Transocean-operated Macondo Prospect. Eleven people were never found[6][7][8][9] and it is considered the largest accidental marine oil spill in the history of the petroleum industry, an estimated 8% to 31% larger in volume than the previously largest, the Ixtoc I oil spill. Following the explosion and sinking of the Deepwater Horizon oil rig, a sea-floor oil gusher flowed for 87 days, until it was capped on 15 July 2010.[8][10] The US Government estimated the total discharge at 4.9 million barrels (210 million US gal; 780,000 m3).[3] After several failed efforts to contain the flow, the well was declared sealed on 19 September 2010.[11] Some reports indicate the well site continues to leak.[12][13]
So much oil wasted we could have used to fight
off terrorists trying to get ‘our’ oil.
What a shame!
BobInget on Mon, 20th Apr 2015 10:50 am
Deepwater drilling is going ahead in the Arctic.
Shell Oil’s persistence is a ten meter high ‘tell’
just how scarce new oil has become.
Shell is betting the entire company, indeed the planet’s environment, on safely
bringing oil out of the Arctic.
Plantagenet on Mon, 20th Apr 2015 11:11 am
BAU is not just a car culture—its a USA culture. Just about everybody else in the world wants to live like they imagine people in the USA live.
Perk Earl on Mon, 20th Apr 2015 11:34 am
“Maybe because I prefer to offer what I see as the likely (yet foolish) approach the world will take going down the PO path even if that path has little chance of succeeding.”
That’s it right there, rockman. TPTB are not about to veer away from what keeps them in power with lots of loot. There must be some theory (or should be) that states; ‘Once a system is in place for long enough without an easy alternative that provides for growing consumption, it is used as if the people running the system are wearing blinders to any problematic eventuation due to personal greed for more power and money, until the whole enchilada crashes due to depletion of a primary finite resource.’
And it’s not that anyone wants that, but how do you convince powerful wealthy people the current system will fail, therefore we must make major changes now to live a more Spartan, sustainable lifestyle, even if that includes the fact any new system will not support as many people? It’s a non-starter.
apneaman on Mon, 20th Apr 2015 12:02 pm
Canada is pretty much the same Plant. Maybe more transit and bike riding. Calgary is one giant land locked urban sprawl – reminds me of Atlanta that way.
shortonoil on Mon, 20th Apr 2015 12:58 pm
Shale, bitumen, arctic, ultra deep water, and high sulfur extra heavy will be shut-in over the next few years. The present price level does not allow for their continued operation.
http://www.theguardian.com/business/2014/jan/30/shell-shelves-alaskan-arctic-drilling-oil
Even though shale has seen a bit of a reprieve lately, as excess capital with no were else to go, floods into energy equities, it is based on the erroneous assumption that prices will go back to $90 to $100. This sounds suspiciously like the housing market were prices can only go up, and that resulted in a $6 trillion bale out to save the banks!
http://www.zerohedge.com/news/2015-04-20/oil-slips-saudi-record-production-promise-specs-pile-blackstone-skeptical
Tens of $trillions are at steak, and yet investors resort to the same pie in the sky approach they have been following for the the last 20 years. This will no doubt end equally as well!
http://www.thehillsgroup.org
steve on Mon, 20th Apr 2015 2:50 pm
Yes I expected more out of Canada…but Unfortunately they are as dumb as those in the States….Also sending 100 “advisers” to Ukraine. Number one selling vehicle in Canada is the Pick-up truck… sigh….
rockman on Mon, 20th Apr 2015 3:55 pm
Bob – Actually though the numbers seem huge and given the period of time it was spent the Arctic could be a total bust for Shell and it wouldn’t put a dent in them. Last year they lost $2 to $3 BILLION in the Eagle Ford Shale play and almost no one noticed.
Plantagenet on Mon, 20th Apr 2015 4:24 pm
rockman is exactly right (as usual).
Shell is putting a heck of a lot more money into building up their NG reserves by taking over a British NG corporation named BG. That suggests that Shell really thinks the future lies in NG.
Apneaman on Mon, 20th Apr 2015 4:47 pm
steve, not quite that dumb, but well on the way. More telling, is the silence on all things environment. At least in America the government can’t just fire federal climate and other environmental scientists without any real opposition. I know some republican politicians said they would like to do just that, but that’s a process and a big fight – here they just gutted them – no discussion and very little public outcry. I guess the ultimate level of dumb down does not matter – dumb enough to be happily driving towards the cliff full speed.
Dredd on Tue, 21st Apr 2015 11:38 am
“Oil Will Continue to Run the World” into the collective grave (Thank You For Murdering Us).