Peak Oil is You
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Page added on December 22, 2015
The Fallacy Of Peak Oil Demand
I have seen the handwriting on the wall for the coal industry for more than a decade. Not only is coal the most carbon-intensive of the fossil fuels, it is also the fuel that has the greatest number of potential replacements. Renewables may ultimately scale to displace a substantial fraction of our coal consumption, but it’s natural gas and nuclear power that spell the beginning of coal’s demise. Given the urgency with which the world is trying to curtail greenhouse gas emissions, natural gas and nuclear power could legitimately displace the power we currently produce from coal. In fact, this summer natural gas did overtake coal for the first time to become the leading source of electricity in the U.S.
Thus, those who argue about peak demand scenarios for coal consumption have some justification for that argument. There are scalable replacements for coal, and there is widespread legislation that will speed up that transition. Coal demand will soon peak and begin to decline because there are lower-carbon alternatives. That’s why I have consistently advised investors to avoid coal companies like Peabody Energy BTU +0.00% Corporation (NYSE: BTU) and Arch Coal Inc (NYSE: ACI), which have seen their market value obliterated over the past 5 years.
But the peak demand argument falls apart for petroleum. The difference between coal and oil is there is simply no scalable alternative to petroleum. The cars, airplanes, ships, and heavy trucks that make up the global transportation system are almost exclusively dependent on petroleum. Further, our dependence on petroleum continues to grow.
What about biofuels? The world currently consumes about 92 million barrels of oil per day. The world produces about 1.5 million barrels of oil equivalent (BOE) of biofuels per day. Since 2005, biofuel production in the world has grown by 1 million barrels a day, while crude oil production has grown by nearly 7 million barrels a day. Biofuels are certainly not growing at a fast enough rate to meet world demand – much less cut into petroleum’s dominance. Further, there isn’t enough available arable land in the world for biofuels to ever make more than a tiny contribution to the world’s oil supply. Advanced biofuels which many advocates assured us could deliver us from our oil dependence have failed to deliver – a topic I will address in a future column.
That brings me to the other primary contender often mentioned as a crude oil killer: the electric vehicle (EV). In theory, as the world switches to EVs, our crude oil consumption will peak and fall. But what is actually happening?
According to Inside EVs, a website that reports on EV sales, through the first 11 months of 2014 there were 110,011 EVs sold in the U.S. This year, sales in the first 11 months have fallen to 102,898 vehicles — a decline of 6.5%. Annual EV sales did grow rapidly from 2011 to 2013, but haven’t grown much beyond 2013′s 97,507 vehicles sold.
But 100,000 vehicles per year is nothing to sneeze at, right? Well, let’s compare that against overall vehicle sales. According to Automotive News, the first 11 months of 2014 saw overall vehicle sales in the U.S. of 15,015,434 automobiles (cars, light-duty trucks, and SUVs). That means that electric cars sales accounted for about 0.7% of the market. But what’s much more revealing is that overall vehicle sales in the U.S. this year through November were 15,826,634 automobiles. Thus, in one year the number of cars sold in the U.S. has increased by 811,200 vehicles. That’s a one-year increase that’s more than double the total EV sales of the past 5 years — and almost all of those vehicles run on petroleum.
Globally, the situation is much the same. Demand for liquid fuels is outpacing the ability of biofuels to keep up, and conventional vehicle sales are vastly outstripping EV sales. This is why global demand for oil has increased in 18 of the past 20 years. The only exceptions were during the global slowdown of 2008 and 2009, but then in 2010 demand growth was so strong that the world once again set an all-time oil consumption record. So those who expect ExxonMobil (NYSE: XOM) to meet a fate similar to Peabody’s are going to be waiting a very long time.
A popular saying with some is “The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil.” It may very well be that the twilight of the coal age is upon us, because scalable replacements are available. But there is still nothing on the horizon that signals even the beginning of the end of the oil age.
13 Comments on "The Fallacy Of Peak Oil Demand"
Davy on Tue, 22nd Dec 2015 9:34 am
The end of the status quo through a decay and break up of globalism will end the oil age. Of course Forbes would never consider the end of the status quo as a factor. It’s the economy stupid and the economy is not well. Oil and the economy are two pillars holding up a 7Bil plus human civilization. This is the real issue and danger.
godq3 on Tue, 22nd Dec 2015 11:19 am
“But there is still nothing on the horizon that signals even the beginning of the end of the oil age.”
What about sales price two times lower than price needed to maintain production level?
ERRATA on Tue, 22nd Dec 2015 11:52 am
What happened with calculations showing that the total electrification of road transport will require tripling the number of power plants and power lines?
Revi on Tue, 22nd Dec 2015 12:19 pm
What do you think the chances are of everyone being able to drive around in a steel box that weighs 3000 to 5000 pounds for the rest of the century? How about the rest of the decade? There is an alternative to oil and that is walking. We’ll have to save some diesel to grow and get food around. People don’t have any idea how exceptional the 20th century was. The 21st century may not end so wonderfully. In 1915 Ford made the internal combustion engine available to the masses. In 1815 it was possible to get around on a steam train. In 1715 you could take a sailing ship around the world. In 1615 there were people moving to Virginia from England. They had no idea about the 90% death rate for the other immigrants. The next century may be a little more like that…
PracticalMaina on Tue, 22nd Dec 2015 1:09 pm
If only, if only. If only people realized, and we could start to address the fact that people shouldn’t be allowed to drive on the road with any 5,000 pound vehicle without a special license, the reason we cant get 90mpg is because it would be unsafe to drive that vehicle on roads that also contain a-holes in suvs on cell phones.
brianr on Tue, 22nd Dec 2015 2:10 pm
My recollection is that several years ago I read about genetically engineering algae to produce oil directly. Does anyone know of a good overview of the present status of bio fuels?
It seems, (intuitively, without research)that it will be decades until there will be a wholesale transition to electric vehicles. There is an enormous amount of “stored” or “wasted” energy inherent in a modern gasoline powered vehicle, of which I think only a very small fraction of that energy can be recovered from those large steel land yachts upon recycling. Think of the implications of replacing most the existing vehicles in existence.
Apneaman on Tue, 22nd Dec 2015 2:58 pm
brianr, look here
http://energyskeptic.com/?s=bio+fuels
rockman on Tue, 22nd Dec 2015 3:36 pm
PM – There is an almost endless list of changes that would greatly improve our energy predicament. That’s the easy part…the tough part is to put any of them into effect.
I’ll let you go first: how do you prohibit folks from owning big vehicles? The EU has provided some incentive to cut back by having relatively high fuel taxes. But even they don’t ban auto ownership.
Anonymous on Tue, 22nd Dec 2015 5:00 pm
Q:How much oil(crude) did it take to produce those 1.5meg BOE of bio-fools? If that 1.5 million barrels were grown, processed and distributed without any FF inputs, that would be an impressive achievement indeed, and would signal that at least, in principle, ‘getting’ off oil is possible.
But, Im pretty sure those 1.5mil BOE had a rather large helping hand from good old oil-exactly how much would make an interesting read itself. We could go further and say, bio-fool production would be impossible except on very local scales, w/o oil. So bio-fools are not really relevant here. And everyone else posting here seems to(mostly) understand the idea of private 5000 pound people movers and its oil-based purpose built networks of roads is fatally flawed.
EVs as they are currently being ‘researched’ and marketed, are also fatally flawed. An attempt to maintain the status-quo and replace it with a slightly different status-quo. Why even bring them up if this is how things are being proposed?
No one ever talks about all the oil we’d save if car-dependency, or casual on demand air-travel was not forced upon us. Or the US war machine, another huge oil user. A lot of people like to solely think about how much ‘oil’ they will save if they had a 5000 pound electric SUV instead of one that burns gas.
rdberg1957 on Wed, 23rd Dec 2015 1:29 am
Individual EV’s ought not be mass produced. Electric motors are very efficient. Electric cars with expensive batteries which contain rare earth elements aren’t viable. Using electric motors for public transit makes sense. We will need to power down, increase our efficiency, conserve.
Dredd on Wed, 23rd Dec 2015 5:05 am
Big Coal was the darling poison for the Industrial Revolution of circa 1750 (The Evolution of Models – 18).
When oil became the replacement, the choice of the empire’s warlords of their warships circa WWI, coal was in for trouble (The Universal Smedley – 2).
Big Coal lasted a century after that though, so I expect oil to be around longer than civilization will be around (Civilization Is Now On Suicide Watch).
But it will be lonely in the grave from which it once overpopulated other graveyards around the globe.
Davy on Wed, 23rd Dec 2015 5:22 am
Electric transport has a place in the power down. It offers multiple options on impute power and output.
The problem as usual is application. Most transport applications today must include the basics of the status quo. We must have discretionary use that has a distance component at an economic price. Those variables limit efficient application. If our lifestyles and attitudes changed we could significantly improve the efficiency and the effectiveness of ev applications.
The problem today is the status quo is now beyond adaptation at the macro level. Macro energy transitions are no longer possible in time and resources. We have spent the lion share of our cumulative wealth on a way of life with no future. We are now scrambling to adapt when adaptation is not an option.
EV, still has a vital niche and can be adapted post status quo into many useful activities in a salvage hybrid economy that is likely ahead. EV is no silver bullet but just like its big brother Alts they should be supported at all levels.
JuanP on Wed, 23rd Dec 2015 5:47 am
I will quote myself. 😉
“The global vehicle fleet is around one billion vehicles so a million electric vehicles are aproximately 0.1% of the fleet. https://en.m.wikipedia.org/wiki/Motor_vehicle
If we build half a million electric cars per year, we will never replace the fleet with electric vehicles. Even if those vehicles lasted FOREVER it would still take 2,000 years to replace all oil burning vehicles.”