Have we already seen peak oil demand?

"davesaddiction @ opposite-lock.com" (davesaddiction) 09/15/2020 at 12:20 • Filed to: None

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!!! UNKNOWN HEADER TYPE (MULTI-LINE BREAK?) !!!

If BP Plc is correct in its prediction released this week, the future is here and the oil and gas industry will no longer see relentless growth of oil demand.

The supermajor, in the report issued Monday indicated an end to the era many thought might last another 10 years or more reported Bloomberg.

Oil consumption may never return to levels seen before the coronavirus crisis took hold, BP said in a report on Monday. Even its most bullish scenario sees demand no better than “broadly flat” for the next two decades as the energy transition shifts the world away from fossil fuels.

BP is making a profound break from orthodoxy. From the bosses of corporate energy giants to ministers from OPEC states, senior figures from the industry have insisted that oil consumption will see decades of growth. Time and again, they have described it as the only commodity that can satisfy the demands of an increasing global population and expanding middle class.

The U.K. giant is describing a different future, where oil’s supremacy is challenged, and ultimately fades. That explains why BP has taken the boldest steps so far among peers to align its business with the goals of the Paris climate accord. Just six months after taking the top job, Chief Executive Officer Bernard Looney said in August he’d shrink oil and gas output by 40% over the next decade and spend as much as $5 billion a year building one of the world’s largest renewable-power businesses.

BP’s report comes ahead of three days of online briefings starting Monday on its clean-energy and climate strategy. The study considers three scenarios, which aren’t predictions but nevertheless cover a wide range of possible outcomes over the next 30 years and form the basis of the new strategy Looney announced in August.

The “Rapid” approach sees new policy measures leading to a significant increase in carbon prices. The “Net Zero” course reinforces Rapid with big shifts in societal behavior, while the “Business-as-usual” projection assumes that government policies, technology and social preferences continue to evolve as they have in the recent past.

Source: Bloomberg

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MiniGTI - now with XJ6 > davesaddiction @ opposite-lock.com 09/15/2020 at 12:33

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Nice, though that graph seems laughably optimistic. 

davesaddiction @ opposite-lock.com > MiniGTI - now with XJ6 09/15/2020 at 12:36

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That graph was only for attention (and found in an image search).

Interesting that the head of BP would say this. I guess this is the right time to reset expectations for investors?

Azrek > davesaddiction @ opposite-lock.com 09/15/2020 at 12:39

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So with the US Dollar tied to the Petro dollar...are we doomed?

https://www.investopedia.com/articles/forex/072915/how-petrodollars-affect-us-dollar.asp#:~:text=Petrodollars%20are%20dollars%20paid%20to,based%20on%20the%20U.S.%20dollar.

For Sweden > davesaddiction @ opposite-lock.com 09/15/2020 at 12:40

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Step 1: put a small tax on fossil fuel production

Step 2: use funds to buy surplus wind and solar energy

Step 3: use that energy to power carbon capture

Step 4:  plan works so well the planet enters an ice age

HammerheadFistpunch > MiniGTI - now with XJ6 09/15/2020 at 12:53

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it’ s all about scale, the best case scenario on that graph is only a 3 0% reduction in demand over the next 20 years from today . huge, and still very optimistic, but within the realm of the possible.

HammerheadFistpunch > For Sweden 09/15/2020 at 12:53

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Step 5. Free ice for all!

TheRealBicycleBuck > For Sweden 09/15/2020 at 12:56

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There was a book I read many years ago that explored the idea that  industrial emissions we’re the only thing keeping us from entering the next ice age. We weren’t aware of the situation, so everyone was quite surprised at the rapid onset of a new ice age after global accords led to emissions reductions. The movie Day after Tomorrow echoed the book, but there wasn’t a nuclear-powered spaceship at the end. 

TheRealBicycleBuck > HammerheadFistpunch 09/15/2020 at 13:08

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I wonder how many people saw the graph and assumed that the future end point was zero.

davesaddiction @ opposite-lock.com > Azrek 09/15/2020 at 13:38

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Well, if the petro dollar stays flat for the foreseeable future, it’d probably not a bad thing.

newnamesameme > Azrek 09/15/2020 at 14:11

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Not even remotely. We are a fiat currency with full control. The Fed can literally just mark up any account at any time with any figure and move on. The federal debt/deficit is all bullshit. Now, local/state debts/deficits are another story because they cant make their own money but for the feds all this worrying about money is merely an act.

My bird IS the word > davesaddiction @ opposite-lock.com 09/15/2020 at 15:00

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Hopefully with all the innovations in ICE by itself will help . let alone alternative energy.

davesaddiction @ opposite-lock.com > My bird IS the word 09/15/2020 at 15:18

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Will be interesting to watch. Both Mrs. addiction and I are in the business, and both (miraculously) still have our jobs, so we’ll see what the future brings. Honestly, if oil prices make it back to a nice flat $50-60 for the longer term , I think that could be good for both the industry and consumers. At current prices, many US producers aren’t going to last much longer.

BoxerFanatic, troublesome iconoclast. > davesaddiction @ opposite-lock.com 09/15/2020 at 15:47

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Funny, the headline on the front page, cross-posted from Earther, just said

!!! UNKNOWN CONTENT TYPE !!!

That suggests peak oil SUPPLY, which the environmental movement has been decrying for decades now.

However, they should be CHEERING if we have hit and are on the downward slope of peak oil DEMAND, which means that lower use of fossil fuels and other petrochemicals are reducing d emands for crude oil.

However, like abandoned cities, it is not necessarily great that less demand has to pay for an infrastructure that requires distribution of costs across a large economic base.

Oil distribution, like garbage collection, water treatment, power generation and distribution, and other infrastructure industries are VERY expensive. .. that means that below a certain economy of scale, supply can be expensive, or even endangered if production cannot be sustained for what demand remains.

Economic balance can hopefully be achieved .

davesaddiction @ opposite-lock.com > BoxerFanatic, troublesome iconoclast. 09/15/2020 at 15:50

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Yeah, there’s quite a difference...

Hoping for balance as well.

MiniGTI - now with XJ6 > TheRealBicycleBuck 09/15/2020 at 16:16

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Ha I guess you’re right. They’re hoping to get back to late 90s levels but 2040. Well don’t get me wrong I’d love to see it. 

Manwich - now Keto-Friendly > Azrek 09/15/2020 at 16:19

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I disagree that the US dollar is tied to the ‘petrodollar’. Consider that this wasn’t the first time the world had to deal with a glut of oil. I recall 1997-1998 where I recall reading headlines like “the world is awash in oil” and I recall oil going down to $8 or $9 per barrel.

The USA and the US$ survived that just fine. However things were tough for oil dependent countries.

If you research it, countries like Saudi Arabia have been slowly working on becoming less dependent on oil.

Manwich - now Keto-Friendly > newnamesameme 09/15/2020 at 16:26

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“The Fed can literally just mark up any account at any time with any figure and move on. The federal debt/deficit is all bullshit.”

No, actually it isn’t. What it is, is a balancing act. Sure they can print money. Actually in a growing economy, printing money is a necessity.

But print too much and you have inflation and an unstable currency.

Currency stability is essential for a currency to be useful.

And there ARE limits to how much a country can borrow... Canada came close to hitting that limit in the early 1990s and we had interest rates that peaked at 14% as a result. Why did interest rates have to go that high? Because our GDP-to-Debt ratio was not good.. and thus, the only way to get people to buy our debt was to offer a juicy high interest rate.

The USA has a much bigger economy and thus, can handle much more debt.

Anyone who thinks debt and deficits are bullshit are only demonstrating their own ignorance.

Manwich - now Keto-Friendly > davesaddiction @ opposite-lock.com 09/15/2020 at 16:29

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There are many factors that will affect demand for oil and oil-related products.

And predicting how it will play out is exceptionally complicated.

Even with 100% of all new vehicles being BEVs, there will still be plenty of demand for oil-related products in the form of plastics, lubricants and other stuff.

And while we may have a decrease in energy used per person, there is still population growth that will offset that to some extent.

davesaddiction @ opposite-lock.com > Manwich - now Keto-Friendly 09/15/2020 at 16:33

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Yeah, it’s definitely complicated, but if there’s a seismic shift in both business travel and WFH policies over the next decade, that will have significant impact.

U.S. petroleum consumption by end-use sectors’ share of total in 2019 2

Transportation 68%

Industrial 26%

Residential 3%

Commercial 2%

Electric power < 1%

My bird IS the word > davesaddiction @ opposite-lock.com 09/15/2020 at 16:52

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Just a heads up that lockheed martin is working on nuclear fusion

https://www.lockheedmartin.com/en-us/products/compact-fusion.html

So you may want to diversify a smidgen

davesaddiction @ opposite-lock.com > My bird IS the word 09/15/2020 at 16:56

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Haha - we’ll be alright. I did watch the Inside Bill’s Brain episode about nuclear power. Worth a watch.

Manwich - now Keto-Friendly > davesaddiction @ opposite-lock.com 09/15/2020 at 16:58

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Consider as well that even if 100% of all new vehicles were BEVs, it would still take nearly 10 years for that to result in 50% of the vehicles in use on the road to be BEVs.

So there will be plenty of demand for oil for at least the next decade.

It’s just looking bad right now because recessions generally cause drops in demand for commodities like oil.

davesaddiction @ opposite-lock.com > Manwich - now Keto-Friendly 09/15/2020 at 17:04

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Yeah, I know, but I still wonder what the long-term effects of this pandemic will be to the “normal” that we knew before it.

newnamesameme > Manwich - now Keto-Friendly 09/15/2020 at 17:38

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lol, sure. Yes, there are of course real restraints to resources. Not everyone on earth can have a pony. T hat is obviously true.

But we are not remotely resource restrained at the moment and havent been for a long time. The economy can easily handle trillions more spending from the fed govt on all sorts of stuff.

If we were operating at full capacity and true full employment where everyones salaries/benefits were rising through supply/demand id agree w/you. But the last time that was even remotely true was the late 90s.

Every dollar of Fed govt deficit is a dollar of income in the private sector. Anyway..it would not appear that i am the ignorant one.

For an accessible explainer i recommend this book: https://www.amazon.com/Deficit-Myth-Monetary-Peoples-Economy/dp/1549160370/ref=asc_df_1549160370/?tag=hyprod-20&linkCode=df0&hvadid=459726176530&hvpos=&hvnetw=g&hvrand=643535405932894958&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9029189&hvtargid=pla-943674158855&psc=1

Enjoy!

Manwich - now Keto-Friendly > davesaddiction @ opposite-lock.com 09/15/2020 at 17:45

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Well if you look at the Spanish Flu epidemic, which was far worse, then we can expect things getting back to ‘normal’ by the end of 2021.

And in terms of long-term effects, you can have a look at this:

https://en.wikipedia.org/wiki/Spanish_flu#Long-term_effects

davesaddiction @ opposite-lock.com > Manwich - now Keto-Friendly 09/15/2020 at 17:51

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WFH and videoconferencing didn’t work quite as well back then. =)

Manwich - now Keto-Friendly > newnamesameme 09/15/2020 at 18:42

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“Every dollar of Fed govt deficit is a dollar of income in the private sector. Anyway..it would not appear that i am the ignorant one.”

Yes you are... and so is that author. Taking your approach as been done before... by Germany in the 1920s and more recently by countries like Zimbabwe.

The end result was hyperinflation and a currency that became useless in both cases.

And I clearly remember Canada in the early 1990s... and how the government deficit and debt that built up in the 190s caused a big time recession in the early 1990s. Have a read as to where Canada was in 1990:

https://www.budget.gc.ca/pdfarch/1990-plan-eng.pdf

In addition to high interest rates, house prices dropped by around 40% between 1989 and 1993. There was also high unemployment.

But because of the action the government took, things were looking up by the mid 1990s.

And I’d like to remind you again that I personally lived through it.

Deficits are not a myth. They might seem like a myth until you hit the point that people and institutions in the market stop buying your debt. Then you have a choice of making massive budget cuts overnight, which in turn causes a recession. Or you can print money and have hyperinflation, which causes even worse economic effects.  Or raise interest rates which gives bond holders a bigger reward, but the consequence is that everyone else in the country has to pay for that.

And I don’t give a shit if some author wrote a book trying to make some money saying it is. I’ve taken economics at the university level and I know enough, studied enough and lived through enough to know that claims like this are BS.

I also know enough history to know that some places had to learn the hard way that deficits and debt are NOT BS.

You and this author absolutely ARE ignorant on this.

T he fact that this author is employed at “ Stony Brook University” and got her Phd from “The New School for Social Research” only lowers my opinion of these two institutions .

Manwich - now Keto-Friendly > davesaddiction @ opposite-lock.com 09/15/2020 at 18:43

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LOL... yeah... that too!

newnamesameme > Manwich - now Keto-Friendly 09/15/2020 at 19:17

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lol

John Norris (AngryDrifter) > davesaddiction @ opposite-lock.com 09/15/2020 at 21:36

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Oil consumption may never return to levels seen before the coronavirus crisis took hold, BP said in a report on Monday. 

So we are still human. After COVID we are still going to vote with our pocket books . And at some point there will be a post COVID era.  Alternative energy sources have come a long way, but they still are not even close to the efficiency and practicality of oil and gas and the infrastructure in place to support it . I don’t see people supporting taxed subsidies for ever. We will see were it goes.

davesaddiction @ opposite-lock.com > John Norris (AngryDrifter) 09/15/2020 at 22:44

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I agree, but the changes in business travel and WFH policies may prove him right.