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Page added on September 11, 2014
International Energy Agency slashes oil demand outlook
The oil market has lost pace because of weak growth in Europe and slowdown in China, the International Energy Agency (IEA) said on Thursday, cutting its estimates for demand.
The growth in demand for oil this year and next will be markedly lower than expected, the IEA said, and this together with plentiful supply explains why the price of oil has fallen recently below $100 per barrel.
“The recent slowdown of demand growth is nothing short of remarkable,” the agency said.
Also “OPEC demand has been remarkably robust in view of the troubles in Libya and Iraq,” the International Energy Agency said in its monthly review of the oil market.
It attributed the “clear slowdown” in demand growth to “ongoing weakness in both European and Chinese economies, coupled with lower-than-expected oil deliveries in Japan and Brazil.”
The IEA cut its estimate for oil demand this year to growth of 1.0 percent or to 900,000 barrels per day, from a previous estimate of 1.1 percent or 1.0 million barrels per day.
That takes total demand for the year to 92.6 mbd.
In the second quarter of this year, growth of demand would fall to the lowest rate for two and a half years to about 480,000 barrels per day from the level in 2013.
“Euro zone economic growth is petering out, while US petrochemical usage fell alongside pronounced declines in Japanese power-sector demand,” the IEA said.
The agency “tempered” its outlook for 2015 to growth of 1.2 mbd from 1.3 mbd forecast previously.
This update put global deliveries at 93.8 mbd, or about 165,000 bd less than previously forecast.
But this still amounted to a “notable” acceleration of demand from the level in 2014, the IEA said.
The price of benchmark West Texas Intermediate oil for October was at $91.53 per barrel early on Thursday, and the price of Brent North Sea crude was $98.00
14 Comments on "International Energy Agency slashes oil demand outlook"
shortonoil on Thu, 11th Sep 2014 9:52 am
“The oil market has lost pace because of weak growth in Europe and slowdown in China, the International Energy Agency (IEA) said on Thursday, cutting its estimates for demand.”
Again they ride the cart out before the horse. The world slow down is occurring because petroleum’s ability to power the economy is declining. Demand for petroleum is not falling because the economy is slowing down, the economy is slowing down because petroleum’s ability to power the economy is falling. High quality petroleum with a high energy content is an essential component for the world’s economy.
This will only worsen as time progresses. We passed the per unit energy half way point in 2012, and have probably reached peak petroleum price (see our post below):
http://peakoil.com/consumption/if-oil-prices-stay-low-for-long-putin-and-opec-are-headed-for-trouble
As long as economists insist that economics is the root of the problem, and not physics they will continue this nonsense that everything will return to normal with the right economic policy. They have been saying that for six years, and things have just continued to deteriorate following the Etp curve. Will they continue to expound their unfounded hypothesis until no one can afford to pay them? Seems likely! “When your only tool is a hammer, every problem looks like a nail.”
http://www.thehillsgroup.org/
Perk Earl on Thu, 11th Sep 2014 10:12 am
“The world slow down is occurring because petroleum’s ability to power the economy is declining.”
I presume this is because of the high price of oil?
Nony on Thu, 11th Sep 2014 10:18 am
High oil prices are causing the economy to slow which is reducing demand which is making price drop. Bit of a perpetual motion machine there. And a bit of not understanding econ 101 price-volume supply-demand crossing concepts
I think a more likely insight is that the long-term high price is causing some demand switching that takes time (e.g. fleets of cars moving to higher mileage, aircraft to carbon fiber bodies, etc.).
Of course since nothing is pure, you have layered on top of that economic drivers that would be there regardless of oil (monetary concerns, war jitters) along with supply evolution (depletion of conventional, rise of shale).
Davy on Thu, 11th Sep 2014 10:44 am
Noo said – I think a more likely insight is that the long-term high price is causing some demand switching that takes time (e.g. fleets of cars moving to higher mileage, aircraft to carbon fiber bodies, etc.).
I doubt that Noo! The demand switching is the switch going off.
The Chinese economic implosion is probably the biggest reason:
http://www.zerohedge.com/news/2014-09-10/how-china-boom-unravels-one-person-time
In the case of efficiency efforts they have clearly hit the diminishing returns wall. What good is upgrading something with an energy efficiency item or process if the cost of the upgrade can never be recovered? With the inflation seen in so many capital cost areas the ability to save money from efficiency upgrades has been severely degraded. Another issue is many of the significant upgrades in the major economies have been done already.
Northest Resident on Thu, 11th Sep 2014 11:56 am
It costs MORE and MORE to extract oil, which drives the price up. Demand destruction sets in as consumers balk at paying the high price. Less oil getting burned results in a slowing and contracting economy, because as everyone knows or should know, economic growth is directly related to how much energy is burned. Also, as shortonoil regularly points out, you can’t say that we are burning X-number additional barrels of oil today than yesterday, therefore the economy should be growing, BECAUSE the energy in the average barrel of oil (with the shale crap mixed in) is much much less than what it used to be. Burning a million barrels of oil today gives far less actual energy than burning a million barrels of oil ten years ago provided.
Kenz300 on Thu, 11th Sep 2014 12:09 pm
The fact that biofuel use is growing around the world might have something to do with the drop in demand.
Rising fuel economy standards for cars and trucks might have have something to do with the drop in demand. 20 MPG vehicles are being replaced with 40 MPG vehicles.
The rising popularity of electric, flex-fuel, hybrid, biofuel, CNG, LNG and hydrogen fueled vehicles might have something to do with the decline in demand for oil. Ending the oil monopoly on transportation fuels is a good thing.
Many cities are looking at the traffic and pollution that has become overpowering and are starting to make changes. Cities are moving to become more people centered and less auto centered, There are more and more cities adopting bicycle friendly policies. Adding more places to lock and store a bicycle at stores and apartments is a good first step. Cities are looking to create more walkable and bike able areas that connect work, schools, home and businesses. Even the trolly is making a come back. Convenient mass transit reduces congestion and pollution. It also makes the cities much more livable.
Big Companies, Big Renewable Investments
http://www.renewableenergyworld.com/rea/news/article/2014/08/big-companies-big-renewable-investments
———————-
E-Bike Sales Are Surging in Europe – NYTimes.com
http://www.nytimes.com/2014/08/19/business/e-bike-sales-are-surging-in-europe.html?emc=edit_th_20140819&nl=todaysheadlines&nlid=21372621
shortonoil on Thu, 11th Sep 2014 1:53 pm
“I presume this is because of the high price of oil?”
For 2014 it will require, on average, 5,869 BTU to produce $1.00 in goods and services.
http://www.thehillsgroup.org/depletion2_008.htm
One gallon of crude, API 35.7 deg, contains 140,000 BTU, but the consumer gets less than half of that because some of that energy is needed to produce the petroleum, and its products. As time progresses the amount of energy needed to produce the petroleum increases, so the amount delivered to the end consumer per unit declines. The amount of economic activity that can be generated by the end consumer declines because they have less energy to power that activity.
This per unit decline over time has been going on since the beginning of the oil age, but until 2000 the increase in total production was enough to compensate for the per unit energy decline. The increase in oil production that we have seen over the last few years has been insufficient to compensate for the ongoing per unit decline. The fact that most of the increase in production has been very low quality oil (low energy content) has only aggravated the situation.
The price of oil is limited by the economic activity it can generate. It must be able to generate enough to allow the end consumer to pay for it. Anything below that, and the average consumer does not have sufficient funds to acquire it. That level appears to be in the $100/ barrel ranch. Whereas the end consumer is limited to what they can pay (and that is declining) the cost of production is ever increasing. When the two meet, oil production ceases. Actually, what happens is that as the energy to produce oil increases, and the energy delivered declines, more and more consumers drop out of the market for oil. Expect the coming end of the oil age to become very apparent over the next five years as oil producers begin restraining E&D, cutting production as margins fall, and shutting their doors.
http://www.thehillsgroup.org/
Northwest Resident on Thu, 11th Sep 2014 2:29 pm
shortonoil — Add to your excellent post above that the economy is incapable of sustaining itself without constant REAL growth. The “growth” that we have seen in our economy and that of other countries — China for example — since 2008 or so has only been accomplished by adding huge amounts of debt to compensate for the declining amount of available energy. The global economy and our national economy have been able to “bounce back” after short periods of oil/energy shortages in the past, but we are now for the first time since the age of oil began experiencing a prolonged and irreversible decline in energy available to power and grow the economies. For that reason, I seriously doubt that we’ll have to wait for more than a year or two before a flock of really bad consequences come home to roost. The economic pressure is coming to a boil, the brittle skeleton of our global economy cannot long withstand shrinkage, and we’re going to begin to notice a collapsing economy near term, I feel certain.
shortonoil on Thu, 11th Sep 2014 4:04 pm
“Add to your excellent post above that the economy is incapable of sustaining itself without constant REAL growth.”
It’s like Heinberg said in his “The End of Growth” there are many dire things on the horizon. There is no law that says that they have to come one at a time.
One would have to be blind not to notice that there is now a whole flock of Black Swans circling above! Swans like geese alight in unison.
Harquebus on Thu, 11th Sep 2014 5:30 pm
The peak oil induced boom bust cycle.
Perk Earl on Thu, 11th Sep 2014 6:43 pm
Great thread! We are definitely in my opinion descending from an oil price affordability ceiling. As pressure in the form of higher prices applies against fairly stagnant wages, that ceiling lowers. I’m not sure the price it has recently dropped to will stay that low – it may ascend some and level off, but it will be not be as high as it was before. It’s like being nibbled away on slowly by piranha’s.
People talked about limits to resource extraction, but how it shows is via an amount the consumers of the overall economy can cough up. You can’t squeeze blood out of a turnip, and you can’t force the membership in the system to pay more for energy, oil, than they can in turn run the engine of commerce via their collective efforts.
So CAPEX can only go up to that point it makes economic sense to pursue a resource.
This limit we’ve hit is now taking on the metaphor of a constrictor, as we get squeezed at the affordability ceiling, yet getting weaker all the time, affording less causing the ceiling to lower, yet by some factor, call it Y, inversely proportional to capex rising.
As affordability and capex pass in the night, we borrow trillions, appropriate resources (south china seas & crimea – attempting for Ukraine), QE, Zirp, and look to the billionaires to lead us to the promised land. Ha! It’s time to pay the piper for ignoring limits to growth and Liebegs law of the minimum, oil (transportation).
Davy on Thu, 11th Sep 2014 7:36 pm
Amen, Perk
rockman on Thu, 11th Sep 2014 8:33 pm
As Earl says: excellent chat. Sounds too simplistic but I think a basic problem economists and others have is appreciating the time lag involved with these changes in the dynamics. And that’s compounded by the complexity of the interactions between the various feedback loops. IOW the entire chicken/egg dynamic gets too confusing for them to unravel IMHO.
Norm on Fri, 12th Sep 2014 4:44 am
LOL no more demand, nobody wants any. This just accidentally happened right when the wells are pumping dry, people no longer want or need oil.
How convenient an explanation, from the authorities.
What would the aliens think.