Michael Klare: The Coming World of "Peak Oil Demand," Not "Peak Oil"

Michael Klare writes that The Coming World of "Peak Oil Demand," Not "Peak Oil".

At the beginning of this century, many energy analysts were convinced that we were at the edge of the arrival of “peak oil”; a peak, that is, in the output of petroleum in which planetary reserves would be exhausted long before the demand for oil disappeared, triggering a global economic crisis. As a result of advances in drilling technology, however, the supply of oil has continued to grow, while demand has unexpectedly begun to stall.  This can be traced both to slowing economic growth globally and to an accelerating “green revolution” in which the planet will be transitioning to non-carbon fuel sources. With most nations now committed to measures aimed at reducing emissions of greenhouse gases under the just-signed Paris climate accord, the demand for oil is likely to experience significant declines in the years ahead. In other words, global oil demand will peak long before supplies begin to run low, creating a monumental challenge for the oil-producing countries.

This is no theoretical construct.  It’s reality itself.  Net consumption of oil in the advanced industrialized nations has already dropped from 50 million barrels per day in 2005 to 45 million barrels in 2014. Further declines are in store as strict fuel efficiency standards for the production of new vehicles and other climate-related measures take effect, the price of solar and wind power continues to fall, and other alternative energy sources come on line. While the demand for oil does continue to rise in the developing world, even there it’s not climbing at rates previously taken for granted. With such countries also beginning to impose tougher constraints on carbon emissions, global consumption is expected to reach a peak and begin an inexorable decline. According to experts Thijs Van de Graaf and Aviel Verbruggen, overall world peak demand could be reached as early as 2020.

In such a world, high-cost oil producers will be driven out of the market and the advantage — such as it is — will lie with the lowest-cost ones. Countries that depend on petroleum exports for a large share of their revenues will come under increasing pressure to move away from excessive reliance on oil. This may have been another consideration in the Saudi decision at Doha. In the months leading up to the April meeting, senior Saudi officials dropped hints that they were beginning to plan for a post-petroleum era and that Deputy Crown Prince bin Salman would play a key role in overseeing the transition.

Emphasis Mine

Overall, this is relatively good news for the environment as less oil consumption means less carbon-dioxide emissions. However, the amount of carbon-dioxide is still far too high to stop the onrush of global warning.

On the geopolitical front, this drop in oil consumption is bad news for the Venezuelan Revolution as there is not enough money to pay for the needed social reforms. This will sharpen the class conflicts there as the wealthy can no longer be tolerated in a contracting economy. The wealthy are banking on the myth that they are better managers of the contracting economy in order to seize power back from the revolution.

In the USA, this oncoming peak in oil demand means the end of the shale oil goldrush and the decline in fracking. Both of these were extremely bad for the environment. Yet, the political establishment was wedded to the idea of energy independence. Ideology is going to collide with reality over this.