Peak Oil is You
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Page added on December 5, 2016
Peak Oil – From Global Catastrophe to Global Opportunity
Modern economics is a matter of supply and demand. And when it comes to ‘peak oil’, it’s the difference between catastrophe and opportunity.
Since the early 20th Century, scientists, experts, and economists have been predicting the manifestation of ‘peak oil’. For years, many people viewed ‘peak oil’ as a herald of global catastrophe, and the end of major economies.
However, in recent years, the supply and demand situation for oil has turned in favour of supply. It now appears that peak oil demand is what organisations and countries need to be aware of.
What’s more, some experts are predicting that this demand will happen sooner than expected. And global oil and gas organisations need to consider their next move in order to stay competitive.
What Do We Mean By ‘Peak Oil’?
‘Peak Oil‘ describes a situation where global oil production hits its peak, then is in perpetual decline. The first prediction of this was in 1919, and an expectation that peak would be reached by the mid-1920s.
Throughout the last century, a number of geoscientists have continued to make predictions. And these predictions have all been proved to be wrong. However, some experts believe this peak may already have happened without anyone really noticing.
Studies have shown that in North America, the volume of oil discovered has dropped consistently since the 1930s. In addition, production of oil in the region has dropped year on year since the 1970s. That’s not to say that overall fossil fuel production has dropped – we’ll come to that shortly.
What people have agreed upon is that the concerns over ‘peak oil’ have abated, or disappeared entirely. The expected global economic collapse is unlikely to take place (or at least be a result of running out of oil).
Supply Outstripping Demand
So what has changed? Well, there are three reasons that keep appearing in a lot of the articles written about ‘peak oil’. They are:
- A huge increase in the volume of shale oil being produced. The oil is produced differently, but can be a direct substitute for crude oil.
- The US-Iran deal signed in 2015 has lifted sanctions on the oil-rich Middle-Eastern country.
- OPEC, which accounts for 43 per cent of global oil production, has, until recently, refused to cut supply. This surplus of supply was the reason the price of a barrel of oil dropped dramatically earlier this year.
This has shifted the thinking on a surplus of demand for crude oil, to a surplus of global supply. Or from ‘peak oil’ to peak oil demand.
Simon Henry, the Chief Financial Officer at Royal Dutch Shell, has predicted that this could happen in as little as five years. Henry stated that, “peak may be somewhere between 5 and 15 years hence…driven by efficiency and substitution.”
This view is at odds with many of the other major global oil producers, however. Exxon Mobil is anticipating a 20 per cent rise to 2040, while Saudi Arabia, the world’s largest crude oil producer, has argued that demand will rise on the back of increased consumption in emerging markets.
But, as some experts point out, even these predictions are built of shifting sands. The global trade slowdown, combined with the events of 2016, could adversely impact demand in developing countries.
Consumers & Organisations Shifting Focus
Whether it’s five years, or fifty years, what is clear is that oil is still a finite resource. Production will eventually diminish, and consumer requirements will change alongside this. This is where the global opportunities come in, but only for organisations willing to keep pace with change.
Public interest in renewable energy is increasing rapidly, and consumer buying habits are changing too. Even industries traditionally driving oil consumption, like the automotive industry, are seeing massive change.
In the UK alone, sales of electric cars have increased by 48 per cent in the past year. Sales of hybrid cars during the same period have increased a whopping 133 per cent. There are large solar panel fields being built around the world, and Ikea is even selling them to consumers in the UK.
Shell and BP are just two of the organisations expanding their portfolios into renewable energy sources, such as biofuels and natural gas. Greater investment in the renewables industry by major organisations has also helped to reduce costs associated with it. And as costs fall, demand from organisations and individuals will inevitably rise.
It would be foolish to make predications given how difficult it is to predict correctly about oil and energy. It’s a topic that is unlikely to go away any time soon, and one that organisations and wider supply chains need to be keeping up to date with.
Do you have a view on ‘peak oil demand’? Do you think it’s time to focus more on renewable energies? Let us know what you think in the comments below.
10 Comments on "Peak Oil – From Global Catastrophe to Global Opportunity"
makati1 on Mon, 5th Dec 2016 8:53 pm
Maybe procurious needs to dump his oily investments and stop dreaming of a future run by ‘alts’. LMAO
forbin on Tue, 6th Dec 2016 2:44 am
Do you have a view on ‘peak oil demand’?
yes , its another name for Peak Oil …..
(sighs)
Forbin
dave thompson on Tue, 6th Dec 2016 5:48 am
“Do you have a view on ‘peak oil demand’?” Yes it is a divisive term used by econ 101 annalists to support a failing system.
Cloud9 on Tue, 6th Dec 2016 7:27 am
If this forecast on population growth in the U.S. is correct, there will be plenty of oil in the U.S. for quite some time. http://www.deagel.com/country/forecast.aspx
Davy on Tue, 6th Dec 2016 7:58 am
Cloud, there are some huge discrepancies there that make that analysis a joke once reality tested. I do not deny the US could resemble those numbers at some point but the others? Please, makati has used that site many times in the past in his agenda driven misinformation effort. If the US fails at that degree so will the rest of the global economy. Populations and economies will fall together. These numbers appear to be based on a NUK war where the US is beaten. A NUK war with a winner? Does that sound like reason? The other issue that could make that site’s misinformation obsolete is Russian/American detente. What could be correct about this site is the degree of fall for the US applied relatively to other nations with a different formula then we would have some good numbers. A formula of collapse in relation to comparative advantages and disadvantages in collapse and within the nature of globalism in collapse.
Cloggie on Tue, 6th Dec 2016 10:02 am
Not a bad article. Major oil companies know how to drill and could use these skills to diversify their oil business to “clean coal” (UCG) and geothermal heat. Additionally they could use their offshore knowledge to build wind parks.
Gorbatchev: He who comes too late is punished by life
Oil companies, pay attention.
Jerry McManus on Tue, 6th Dec 2016 12:00 pm
This whole “peak demand” thing is starting to feel like an outright psy-op. Repeat a fiction often enough and people start to take it as conventional wisdom.
Now, that said, there is such a thing as “demand destruction”, meaning the global economy is falling off of the proverbial cliff.
But rather than evoking the erstwhile Wile. E. Coyote and his timeless defying of gravity, the powers that be would rather convince everyone sitting at home in a pharmaceutical haze that we stopped using those dirty old fossil fuels because we all squeezed EV’s out of our arse like unicorn farts.
Davy on Tue, 6th Dec 2016 12:06 pm
“Bill Gross Reveals The “Global Establishment’s Overall Plan” In Eight Simple Steps”
http://tinyurl.com/j4ym76c
“How policymakers plan to solve a long-term global debt crisis:
1 As in Japan, the Eurozone, the U.S., and the UK, central banks bought/buy increasing amounts of government debt (QE), then rebate all interest to their Treasuries and eventually extend bond maturities. Someday they might even “forgive” the debt. Poof! It’s gone.
2 Keep interest rates artificially low to raise asset prices and bail out over-indebted zombie corporations and individuals. Extend and pretend.
3 Talk about “normalization” to maintain as steep a yield curve as possible to help financial institutions with long-term liabilities, but normalize very, very slowly using financial repression.
4 Liberalize accounting rules to make some potentially “bankrupt” insurance companies and pension funds appear solvent. Puerto Rico, anyone?
5 Downgrade or never mention the low interest rate burden on household savers. Suggest it is a problem that eventually will be resolved by the “market”.
6 Begin to emphasize “fiscal” as opposed to “monetary” policy, but never mention Keynes or significant increases in government deficit spending. Use the buzzwords of “infrastructure” spending and “lower taxes”. Everyone wants those potholes fixed, don’t they? Everyone wants lower taxes too!
7 Promote capitalism – even though government controlled, near zero percent interest rates distort markets and ultimately corrupt capitalism as we once understood it. Reintroduce Laffer Curve logic to significantly lower corporate taxes. Foster hope. Discourage acknowledgement of abysmal productivity trends which are a critical test of an economic system’s effectiveness.
8 If you are a policymaker or politician, plan to eventually retire from the Fed/Congress/ Executive Wing and claim it’ll be up to the Millennials now. If you are an active as opposed to passive investment manager, fight the developing trend of low fee ETFs and index funds. But expect to retire with a nest egg.”
Boat on Tue, 6th Dec 2016 12:25 pm
If you go back to 1950 oil production was around 10 Mbpd. In 2016 it will be around 96 Mbpd. That’s a 1.3 or so Mbpd average. The worlds demand growth the last few years is around the same. If you like simple barrel counting without the drama, not much has changed. In conclusion, there will be more peak oil events.
If producers had any kind organization and cooperation we would see many little peaks every year. Since producers are lousy at organization and cooperation we will continue to see these wild swings and fewer peak events.
Jerome Purtzer on Tue, 6th Dec 2016 1:30 pm
If you take into account horizontal drilling, enhanced field production techniques, low EROI Shale, tar sands, extra heavy oil and throw it all in a blender with massive Ponzi schemes to make it all happen you come up with, drum roll please, Peak Oil. Peak demand is a smoke screen to try to convince people that a high technology future is going to save us all and allow us to colonize Mars.