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Energy Insights: Energy News: Peak oil? The trend to watch is peak car

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Peak oil? The trend to watch is peak car


by Nick Butler 

We all spend so much time looking at the dramatic changes on the supply side of the energy business that we risk overlooking the more gradual but equally important shifts on the demand side. To correct that its worth looking at some new work from the Transportation Research Institute picked up in the excellent Energy Collective blog.

The research shows that in the US – by far the world’s largest consumer of oil – transport sector demand is falling. This is not a temporary phenomenon driven by the economic downturn. This is a structural shift reflecting changes in life style and work patterns as well as gains in fuel efficiency.

And it is a trend which is continuing year by year. In summary “peak car” was in 2004 and since then Americans have owned fewer light duty vehicles, driven each of those vehicles less and consumed less fuel each year.

On each of these three measures the latest figures are lower than the figures for 1984 when the detailed survey work began. The study is part of a series of papers by Dr Michael Sivak all of which are worth reading.

What are the implications of this trend. First the work reinforces the prospect of total US oil consumption continuing to fall and advances the prospect of US self sufficiency as indigenous production of tight oil grows. Oil consumption is concentrated in transportation now and if that market is in decline it is bad news for refiners and all those with major downstream positions.

Then there are wider implications. Oil demand is also falling in Europe and Japan with long established trends which began well before the current recession. All that leaves the global oil market dependent on China and India. The Indian economy is faltering and the projections of an Indian economic miracle look very tarnished. China marches on but I have never believed that the Chinese want to allow themselves to become ever more dependent on oil imports.

Car numbers and oil use in both countries will grow but the projections of demand growth which suggest that China and India between them will be importing 10 or 12 mbd within 10 years begin to look like wishful thinking by the oil industry and the exporting countries. China is capable of limiting car numbers and enforcing ever higher fuel efficiency standards. India meanwhile will sets its own limits to growth because of weak Government, continued rural poverty and the ever simmering risk of ethnic conflict.

The combination of these factors will produce peak oil. Not a peak caused by any supply constraint – global reserve numbers continue to grow year by year despite production of almost 90 million barrels a day – but because demand will peak. When I wrote a few months ago that I thought global oil consumption would peak before 2020 at a level below 100 mbd several readers suggested, with different degrees of politeness that I was off my head. Maybe, but I will stick to my prediction.

As the detailed evidence is beginning to show the period of inexorable oil demand growth is coming to an end.


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