Nearly 12 years ago, I was writing on the blog to pooh-pooh the notion of peak oil (see below). Now it looks as if large numbers of forecasters are in fact not worried about peak oil (the notion that we will run out of oil) but instead are writing about peak oil demand. [via JR, my favourite drug dealer] The first two paragraphs:
The world’s largest oil companies are girding for the biggest shift in energy consumption since the Industrial Revolution: After decades of growth, global demand for oil is poised to peak and fall in the coming years.
New technologies that improve fuel efficiency are starting to push down the amount of gasoline and diesel that’s needed for transportation, and a consensus is growing that fuel demand for passenger cars could fall as carbon rules go into effect, electric vehicles gain traction and the internal combustion engine gets re-engineered to be dramatically more efficient. Western countries’ growth used to move in lockstep with their energy consumption, but that phenomenon is starting to decouple in advanced economies.
Yup. And as economies continue to develop more efficient alternatives to using oil, the price of oil will drop, thus inducing more continued use of oil than many of these forecasters are suggesting. People respond to rising prices by increasing the quantity supplied (as we have seen over the past decade with fracking, etc.) and by decreasing the quantity demanded (more fuel efficient motors, uses of alternative energy).
But the lower prices will ameliorate the impact of reduced demand and increased supply. As the prices fall (think $20/bbl or so in 2017 dollars), people will have less incentive to shift away from using oil.
Yes, I think we will reach a peak oil demand point. I tend to side with those who think it will be later rather than sooner, though.
-- - - - - - -
My blog post from August, 2005:
The Hubbert Peak, Oil Prices, and Speculation
The Hubbert peak theory, also known as peak oil, is an influential theory concerning the long-term rate of conventional oil (and other fossil fuel) extraction and depletion. It predicts that future world oil production will reach a peak and then rapidly decline. The actual peak year will only be known after it has passed. Based on available production data, proponents have predicted the peak year to be 1989, 1995, 1995-2000, or, according to the Association for the Study of Peak Oil and Gas, 2007 for oil and somewhat later for natural gas. This may lead to major economic consequences for the world since modern civilization is dependent on cheap and abundant fossil fuels, especially for transportation, food production, chemical industrial processes, water treatment, home heating and power generation. The Hubbert peak theory is named for geophysicist M. King Hubbert, who correctly predicted the peak of U.S. oil production fifteen years in advance. While controversial, the theory increasingly influences policy makers within government and the oil industry. The current debate is rarely about whether there will be a peak, but rather when it will occur and the severity of the post-peak effects. Even the most generous mainstream reports estimate petroleum reserves lasting no more than 100 years.My reaction: Show me some economics. Show me the effects of expectations on prices.
First, it is incorrect to generalize what might be a geological condition in one field to the world economy. As (or if ) world oil becomes more scarce, prices will rise and extraction rates will decline. Also, higher prices induce more exploration. As Phil Miller says, "We will never run out of oil."
Second, suppose Hubbert is correct. Sort of. Then speculators ought to be driving up the price of oil now by slowing the extraction rate, if not in Saudi Arabia then elsewhere. And keep in mind that even thought the U.S. imports only a small percentage of its oil from Saudi Arabia, if their oil stopped flowing into the world market, that would have a big impact on the world markets.
There was a very informative discussion of these topics by Hamilton and Kaufman recently here. Hamilton points out that the December 2011 future price of oil isn't much different from the current spot price. Apparently, speculators disagree with those who are predicting doom and gloom. If you really think the Hubbert peak is drawing nigh, this is a good time to buy lots of long-term oil futures.
Where is Julian Simon when we need him?