Peak Oil is You
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Page added on December 19, 2016
Peak Oil is Dead. Peak Demand is Dead Ahead.
Today’s issue is a little different to usual.
That’s mostly because of time constraints. I’m preparing my speech for the launch party for The Exponentialist this evening. It promises to be a great event. If you’re coming along (it’s by invite only I’m afraid) then I’ll see you in a few hours.
But there’s another reason. It’s a unique opportunity for you to see some of our best research without taking out a subscription or reading a sales letter. Let me explain.
Yesterday Eoin Treacy and I published our first ever Frontier Tech Investor forecast issue. It’s an extensive and in-depth look at the most important and potentially profitable tech stories of 2017. Things like:
- Why “peak demand” for oil is coming – and what that means for the markets.
- How to turn Saudi Arabia’s new $100 billion tech venture to your advantage.
- Mach 2.0: why super-speed travel is nearly upon us.
- How driverless cars will turn the world on its head.
- The new energy map of the world.
- Why solar is approaching the economic tipping point.
I’ve included one of our forecasts for you below to take a look. It’s the tip of the iceberg.
And here’s the thing. Usually you’d need to be a full-time subscriber to Frontier Tech Investor to receive this. But I know that some people just don’t want to commit to a subscription. I understand that. So I’ve taken the step to “declassify” this issue and make it available as a one-off. You can download your copy without committing to anything.
That gives you the chance to see our work without feeling like you’re obliged to continue receiving it. I think you’ll like what you see and will want to take out a full subscription (which is only £29 for a year). But you may not. It’s your choice. This offer gives you the freedom to decide.
Just keep in mind that this is an unusual offer. I may not repeat it. And it’s only available for a short period of time.
You can take me up on it by clicking here.
Now, let me share one of the key forecasts in the issue. It’s all about oil and a major change in the markets new technology is going to bring about…
So said Sheikh Zaki Yamani, the former Saudi Arabia oil minister, in 2000. It’s ironic, then, that the world is running headlong towards that very moment – the end of the Oil Age – and yet traditional oil nations like Saudi Arabia still seem intent on burying their heads in the sand.
Let’s back up for a second. Everyone is familiar with the concept of “peak oil”.
It’s easy to forget that this was once a prevalent and widely held view. The idea that we were using more oil than was sustainable and that one day oil supplies would simply run out seemed logical.
Technology and the power of the free market exposed the flaw in the argument. Fears of dwindling supply helped push the price through the roof. High prices lead to investment in new sources of oil – and non-fossil fuel methods of power generation. Fracking, tight oil and shale gas brought huge new supplies onto the market.
Suddenly the idea that we’ll reach peak oil supply seems far-fetched.
In fact, the reverse is true. The single most important idea you need to understand about the energy markets is we’re approaching peak demand for oil.
There’s a confluence of technological, social and environmental forces merging all at once, all of which will result in lower – potentially radically lower – demand for oil in the next decade.
For instance, in the next couple of years we’re going to see a revolution in the car industry, in which car ownership falls off a cliff. I predict this will come about much faster than anyone realises.
That’s because of several reasons. But the two to focus on are ride-sharing applications and driverless cars. Every major tech company, and pretty much every major car manufacturer, is working on a driverless car now. There are plenty of estimates that they’ll hit the roads in one way or another in 2018. (Perhaps not everywhere, and you may not be able to buy one for personal use, but for taxis and other ride-sharing businesses it looks likely.)
In the end it’ll come down to cost. The cost of owning a car in the US averages out at $1 per mile driven. Right now, ride sharing costs between $2 and $3 per mile. So it’s still cheaper to own a car.
But the cost per mile for ride sharing is falling all the time. Electrification will reduce it even further. And self-driving cars will result in a collapse in the cost. Once it hits $1 and below, it becomes cheaper to rely on the network rather than own a car.
That won’t kill the car industry, as some people will always want to own one. But it’ll be mighty disruptive. And it’ll lead to “peak car ownership” by 2022, if a recent report by the Rocky Mountain Institute is to be believed.
You also have to factor in that electric vehicles are now starting to compete with traditional petrol and diesel cars. It’s a trend that’s developing rapidly right now. And as it accelerates it’ll change the dynamics of the oil market.
As a Bloomberg report earlier in the year put it, electric cars make up just 0.1% of the global car market today. That’s a number so small as to be dismissed outright.
At least, it looks that way. But all trends start somewhere. And as anyone who understands exponential growth will tell you, the speed with which something like this can go from virtually zero to world changing is remarkably fast.
According to that same Bloomberg piece, electric vehicle sales grew by 60% last year. Extrapolate that growth forward and by 2023 the electric vehicle market will have displaced two million barrels of oil demand a day. That’s roughly equivalent to the oil glut that brought prices from $100 to $22. But it’d be permanent. And it’d likely keep growing.
There’s still some way to go here. But we get some sense of how renewables like wind and solar will alter demand for oil and other fossil fuels in places like Germany and Chile.
For instance, Chile has generated so much solar power this year that half the time… it has to give it away for free. Northern Germany has the same problem with wind power, requiring it to route the surplus through Austria and the Czech Republic.
And it is a problem. A new and good problem to have: too much clean energy and nowhere to store it.
Those are just two examples. For more see our feature on “The new energy map of the world” (and for more detail on solar see this month’s special feature interview with Tony Seba). But what they show is just how revolutionary renewables will be. They’ll bring about a step change in how we generate, store and distribute energy. We expect that to be a big theme in Frontier Tech Investor through 2017.
- We’ve long been of the opinion that demand will peak before supply. And that peak may be somewhere between five and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.
That’s an extraordinary admission. But it’s probably correct. And if previous disruptions are anything to go on, this one will come quicker than anyone realises. Five years may actually end up being an overestimate.
Not that Opec will see it coming.
Oil is still the world’s key fuel source. That makes Opec – and other key oil producing nations who derive wealth and power from oil use – a symbol of the industry as a whole.
It’s rich… powerful… important… and perhaps considers itself invincible.
The idea that technology could disrupt its operations doesn’t seem to be something it takes seriously, just as it dismissed shale gas and tight oil a decade ago, before it turned the industry on its head. Solar and other renewables aren’t on the radar. And neither is the move to electric and driverless cars, which would smash oil demand.
We got a taste of just how Opec sees technology and change to the market last month. Its World Oil Outlook report predicted that oil demand will rise by 16.4 million barrels per day to over 109 million per day by 2040. Opec believes most of that rising demand will benefit… itself.
My prediction is the opposite. I believe oil demand is going to peak within the next five years as electric cars and new energy sources come on stream. And that 2016 forecast from Opec will go down in history as one of those “disruption denial” moments.
Please note: This article was first published in Capital & Conflict on December 7, 2016.
Nick O’Connor is a writer and editor at Moneyweek. He is also the publisher of Exponential Investor.
22 Comments on "Peak Oil is Dead. Peak Demand is Dead Ahead."
onlooker on Mon, 19th Dec 2016 1:22 pm
So here it is folks some more of the constant delusions being spewed out. Of course that is to be expected. If people told the truth, then suddenly most business/investment opportunities would dry up. Nobody invests for a future that does not exist. Now in this article one should have been alerted to its fantasies with its reference to driver less cards. OPEC of course is also delivering fantasies with that 2040 outlook.
We are reaching though Peak Demand but that does not have anything to do now with Efficiency or New Technology. It has to do with an Oil Industry that will no longer be able to nourish the Economy and an Economy which will consequently be withering and together they will reinforce each others downfall. So there you have it. Anybody, want to bet. It is okay, not about making or losing money but seeing reality.
Lucifer on Mon, 19th Dec 2016 1:36 pm
The good news for you Onlooker is i agree with what you said. All this techno babble is getting boring. Oil demand will still go up for a little while longer until the oil price rises and brings demand down again or the economy collapses.
FNORD on Mon, 19th Dec 2016 2:01 pm
Death to Peak Oil! Long live the New Flesh!
Dredd on Mon, 19th Dec 2016 2:40 pm
Peak oil was in place a million years before it became the drug of choice for poisoning the planet.
Its volume has been decreasing ever since.
Peak oil is happening each and every day.
The only way that can changed is through propaganda.
penury on Mon, 19th Dec 2016 5:20 pm
Judging by the yearly circus which the Solstice Festival has turned into in the U.S. peak demand may be arriving at least for the U.S. Consumer spending is down for the second straight year. And it does not look like any great changes are coming soon.
brent on Mon, 19th Dec 2016 7:26 pm
Not saying you are wrong penury, but where did you get the info that consumer spending is down?
Cloggie on Mon, 19th Dec 2016 7:35 pm
Peak oil is happening each and every day.
Touching. Perhaps you look up in a dictionary what peak oil again means.
makati1 on Mon, 19th Dec 2016 8:10 pm
Brent, maybe you are the uninformed one?
“Retail Sales Unexpectedly Dive: Spotlight on Cars and the “Amazon Effect”
“How Inflation Bites Much More than the Official Hoax”
“Three signs the American Dream is fading”
“How Did the American Dream Mall Turn Into a Nightmare?”
All last weeks news…
Cloggie on Mon, 19th Dec 2016 8:19 pm
https://twitter.com/AmRenaissance/status/811024771555229697
Feminism and resulting incompetent female “leadership”, just another stupid modern idea.
penury on Mon, 19th Dec 2016 9:17 pm
Thanks Makati, I am a little slow. Actually I am real slow.
joe on Mon, 19th Dec 2016 10:20 pm
Now heres the real version
1 Nationalist revolution in Europe brings powers to brink of war
2 Unfettered immigration causes social cohesion to breakdown forcing governments to react to a collapse in law and order
3 Attacks on nonMuslims finally causes popular revenge attacks by vigilante groups begining the breakdown of society
4 Liberal and Facist coups both political and military begin to spread as they have begun in from Duterte to Erdogan and el-Sisi their unchallanged success breeds oppertunists in the West, Trump is only a begining
5 Global economic growth slows, national budgets fall, austerity reigns, people begin to understand the importance of aging population and resource overshoot.
makati1 on Mon, 19th Dec 2016 10:24 pm
Penury, slow is much better than dead. I have my moments also. I wonder what I will be like in another 10 years? LOL
rockman on Mon, 19th Dec 2016 10:53 pm
Cloggie – “Peak oil is happening each and every day.” Touching. Perhaps you look up in a dictionary what peak oil again means.
I suspect what D is trying to describe is that silly little acronym I coined some time ago: the POD…Peak Oil Dynamic. Which some did not immediately care for because it was to “inclusive”. Which was exactly the reason I put it out there. The world’s relationship with fossil fuels didn’t revolve around a PO date on the calendar, or the price of oil, OPEC export volume, or horizontal development of the shales, or mpg changes of new vehicles, or expansion of wind power in Texas, or President Obama rescinding the ban on US oil exports which had zero effect since the day it was signed into law, or the US spending $TRILLIONS “exporting democracy” to the Middle East, or etc, or etc, or etc. The rest of the list is very long but the components of that relationship between the global economy is just that complex.
A simple example of the point D has somewhat ineloquently (forgive me, D) made is that the crash of oil prices was just as much an integral part of the POD as the surge in rig count was during the shale boom. Neither of those events exist in a vacuum unrelated to events going on around the world.
And strictyly from the Rockman’s perspective the world has been dealing with the dynamics associated with the nature of PO before he began as a petroleum geologist in 1975. The fact that 99% of the world’s population was not aware of that situation more then 4 decades doesn’t change the fact that it existed back then. Just as the majority still being unable to put all the pieces of the puzzle together today doesn’t change the reality of the POD.
But in all fairness it’s much easier to see the POD in the rearview mirror today the to have recognised it almost half a century ago.
tita on Tue, 20th Dec 2016 2:06 am
“There’s a confluence of technological, social and environmental forces merging all at once, all of which will result in lower – potentially radically lower – demand for oil in the next decade.”
Wishful thinking. There is no hard evidence that we are getting away from more oil usage in 5 years. The main forces driving oil consumption is the price and the growth.
Dredd on Tue, 20th Dec 2016 4:33 am
Peak anything is when it is at its peak.
Oil was at its peak when all of it was in the ground before Oil-Qaeda started peddling it to its victims.
That was a time before it was used as an adjunct to the industrial revolution circa 1750.
It has never been at its peak since, and has been going towards its lowest point every day since then.
Peak oil was about 116 years ago.
Get over it, its use will become history.
Doublespeak not withstanding.
Dredd on Tue, 20th Dec 2016 4:37 am
And what rockman said.
Cloggie on Tue, 20th Dec 2016 4:44 am
But in all fairness it’s much easier to see the POD in the rearview mirror today the to have recognised it almost half a century ago.
http://www.dailymail.co.uk/news/article-2593032/Coal-fuel-UK-centuries-Vast-deposits-totalling-23trillion-tonnes-North-Sea.html
https://www.youtube.com/watch?v=lOBXsmKdlcA
Peak oil, what peak oil?
And since you are the #1 fossil fuel brain around here (forgive me the CRUDE expression, pun intended)…
Do I make a mistake somewhere in saying that worrying in 2016 about fossil fuel depletion is like worrying that the sun will be burned up tomorrow?
Davy on Tue, 20th Dec 2016 5:14 am
Clog, you are blinded by techno optimism hence your inability to process peak oil dynamics, systematic economic decline, and the force multiplier climate change. Thanks Ape for the new view of climate change as a force multiplier which fits its effects well. Thanks Rock for peak oil dynamics becuase it is not the date that matters it is nearness of peak oil.
Clog techno solutions are vital and will make a difference but likely not save us. When your techno optimism rises to the level of a force multiplier then I will be throwing my support behind you. Currently you are ridiculous with your predictions. That said I would not put it past fate to allow something we may feel is irrational and unlikely.
I still believe we are on a collapse gradient that no amount of inertia will change. You don’t get out of these types of traps but that does not mean you die immediately. Coyotes are known to chew their legs off and limp around but their odds of survival go way down. We are trapped in a multidimensional maze of destructive processes. No amount of techno will change that especially considering many of our problems are techno.
Cloggie on Tue, 20th Dec 2016 6:56 am
Davy, I think you are stuck in the recent (ASPO-2000) past and too much in love with your collapse vision, developed over the past decade. You have simply a dislike for technology as you prefer staring in the flames of your fireplace as a modern day Henry Thoreau. At least you have something in common with your favorite adversary makati.
Your vision has quietly become a lifestyle preference & program rather than an “objective view” of future potential.
You will never bother to explain to me why this giant North Sea coal find doesn’t make a difference other than writing again a long and winding, very abstract post, explaining why we are in a “collapse process”.
That doesn’t mean I reject all environmental concerns this site comes up with (pollution, overpopulation, water scarcity, wild-life decline, deforestation, methane ice disasters, etc., etc), but short-term collapse based on fossil fuel depletion or rapid climate change, that possibility no longer ranks high on my to-worry list.
Davy on Tue, 20th Dec 2016 7:45 am
Clog, like I have said when you prove it I am behind you. Fancy talk is not proof. Incomplete examples combined with hopium is not reality. Yes I prefer a pastoral life over a techno one but preferences does not influence my view of reality like with you. I embrace collapse becuase that is what I see not what I want. I am not a makati and revel in death.
I want happiness but real happiness. I want the truth becuase I admire it. Maybe your fantasy is better relatively speaking. Maybe we will all live longer by living a lie. Time will tell. I like the truth even if that means dying sooner. That is my preference yours is hopium and hopium is a friendly lie.
JR on Tue, 20th Dec 2016 4:49 pm
An obvious spiel to buy more useless shit. Typical of what gets published here these daze, mass connesumption for morons.
I hate all ‘investors’ who insist upon continuing this bastardized concept of ‘civilization’. There, I said it. Wish you were all dead.
Mark Ziegler on Thu, 22nd Dec 2016 11:23 am
The real reason why we will have peak demand is because oil will go back to $147.00 a barrel.