Forget Peak Oil, What About Peak Demand?

With so many investors and pundits obsessed with peak oil, they may be missing the real story for oil: that we have passed peak demand and it’s only downhill from here. One of the central tenets supporting the bull market in energy has been the concept of peak oil. Asserting that the world cannot produce much more oil than it currently is, the concept of peak oil predicts a super spike in oil prices. With this view in mind, the less discussed trend going on for oil may instead be peak demand.
Rex Tillerson, the CEO of Exxon Mobil said at the company’s annual meeting on Wednesday that U.S. gasoline consumption had peaked and would slowly decline due to the increased fuel economy of cars and the introduction of biofuels. Since transportation fuel is the main use of oil in the U.S, this does not help demand long-term. He also threw cold water on those oil bulls that have been encouraged by the recent run in oil prices into the low $60 price range. Tillerson said that optimism on the part of oil traders is just a “bet” and that “it’s too early to call this economy”.

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