The Oil Drum

Don’t forget, Oil Consumption has also peaked....

Looking at many of the analyses on TOD, there is a lot of data which indicates that total liquids peaked a year or so ago. Much of the discussion on TOD is about the extent to which this indicates that oil production capacity (ignoring the ability to temporarily overproduce a field) also peaked, circa June 2006. Assuming these Peak Production analyses are correct, by definition in June 2006 the world has also experienced a ‘Peak Consumption’ point.

In terms of the economic an social impact, the crunch is not at the point of 'Peak Oil' , but at the point of 'Oil Shortage', being the point at which ‘inherent’ demand clearly exceeds available supply.

From all that I have read, it would seem that we have still a way to go until we see the majority of the impact on consumption of the large increases in oil price which started about three years ago. At that point, according to Henry Groppe’s analysis (ASPO 2005 Denver), about 50% of the world’s oil consumption was for non-transportation use (mainly in the developing world).

Listening again to Hugh Groppe’s talk (www.evworld.com/evworld_audio/aspo_usa05_hgroppe.mp3 ) it seems to me that the price profile that we have experienced since 2004, should substantially moderate total world demand, mainly by a shift to much cheaper sources of energy for non-transport use in the developing world. The Consumption Peak we saw in June 2006, and the reduction since then are presumably part of this response, and there should be a lot more displacement of consumption still to come over the next few years. The net result should be that the point in time of 'Oil Shortage' may be delayed by a few years, even if oil produciton has peaked or reached a plateau. On this logic, the tightenss of supply which we are seeing now, and which may get much worse in Q4, migth then be followed by a couple of years of much more relaxed supply/demand balance, as consumption reduction projects already in the pipeline come to fruition.

The possibility of such a situation must be on the minds of countries such as Saudi Arabia, and if so should make them very reluctant to make transparent, or reveal by sustained shipment, any reserves of sustainable capacity that they might have acieved or might have in their project pipeline.