Impending Peak Oil Demand

December 19, 2019

Bloomberg:

The oil industry faces an uncertain future. The world is rapidly waking up to the severity and immediacy of the threat from climate change. At the same time, electric vehicles are getting cheap enough to compete with internal-combustion engines. BloombergNEF expects electrics to begin taking over in about a decade:

Meanwhile, concerns over groundwater pollution are leading to growing calls for a ban on hydraulic fracturing, the main source of increased U.S. production during the past decade.

This doesn’t mean the petroleum industry will die. Plastics, most of which are derived from oil, will continue to be important for a huge variety of consumer and industrial applications. And aircraft and ships will take longer to shift from oil-based fuels. But it does mean that consumption will shrink. Where a decade ago people talked fearfully of oil supplies running out, now some are predicting that demand for the black stuff will peak in just a few years.

Reduced demand for crude will send prices plunging, cutting into profits at oil extractors and refiners. Share prices of oil majors have drifted lower in recent years:

But the pain felt by these titans, and by smaller producers, will only be the beginning. Those companies lie at the center of a vast network of suppliers and oil-services companies, which all will feel the sting of reduced demand. And regions that depend heavily on oil-related industries will see their economies suffer.

Biggest and richest among these regions is Texas, which still produces more than a third of the country’s oil and has benefitted tremendously from the fracking boom. Houston has become a superstar city, attracting talented people from all over the globe to work on the advanced technologies that sustain the petroleum industry. Although the state has diversified its economy quite a lot since the 1980s, by some estimates 1 out of 8 jobs in Texas are supported by oil. A big structural contraction in the oil industry won’t destroy the Texas economy, but it would be a stiff headwind for decades. Jobs are already being lost as the industry retrenches, thanks to low prices.

Meanwhile, the nearby states of Oklahoma and Louisiana are just as exposed, as are many lightly populated states such as North Dakota and Wyoming.

Workers in the energy industry need to be prepared for this shift. For knowledge workers, such as geologists, chemists and software engineers, this means cultivating technical skills that can be useful in other fields such as information technology, pharmaceuticals, health care or finance. For managers, it means establishing a network of professional contacts outside the oil and gas industry. Transitioning out of the industry might mean relocating, but chances are that a city such as Houston will be able to leverage existing concentrations of human capital to lure in new industries. In two decades, Houston might be known as a biotechnology hub.

Lower-skilled workers and fracking boom towns, however, will have a much harder time landing on their feet. In contrast to the coal industry, which has shrunk over the years to only about 50,000 miners, the oil and gas industry employs  more than 700,000 blue-collar workers. Just like manufacturing workers who lost their jobs to Chinese competition in the 2000s or construction workers laid off in the Great Recession, these workers are going to have difficulty finding new jobs for similar pay.

15 Responses to “Impending Peak Oil Demand”

  1. dumboldguy Says:

    “Impending” peak demand? LOL. Just more denial of the fact that the only thing that’s “impending” is climate change catastrophe. More bright-sidedness and wishful thinking about what is wanted and “predicted”—-all in the face of the FACT that the climate conference was a failure, the world’s nations are NOT doing enough, and the USA has dropped out of the climate agreement and is drilling like crazy so that it can EXPORT fossil fuels to other countries. Wake up and smell the methane, folks! (Or is that the smell of bullshit from “journalists” who are more concerned with selling papers than telling the full truth.

    • rhymeswithgoalie Says:

      “Peak demand” is hardly a “bright-sided” expectation. We should have (in the fantasy world of uncorrupted politicians) hit that decades ago when the science came in.

      Consider what it means: We will hit the highest annual consumption of oil (for plastic and combustion), and it won’t go higher. Oh joy. The price of oil will be buoyed by people’s greater willingness to buy it as it gets cheaper, and production will remain high as long as there is a profit to be made.

  2. dumboldguy Says:

    RE: “The world is rapidly waking up to the severity and immediacy of the threat from climate change”, it’s time to again post the Onion article from last July, which is as close to the truth as Antonia’s and Bloomberg’s maunderings:

    “EUGENE, OR—Outlining what a shift in public consciousness regarding global ecocatastrophe might require, a study published by researchers at the University of Oregon Monday found the average American must have their life destroyed by a natural disaster every six minutes in order to finally fear climate change. “According to our data, American citizens must lose their home to a flash flood, almost immediately watch a tornado ravage their hometown, and then succumb to heatstroke in 110 degree temperatures before recognizing climate change as a viable threat,” said head researcher and professor Vanessa Verrier, citing the tendency of U.S. citizens to forget about global warming roughly 10 minutes after their homes were devastated by wildfires. “Roughly seven minutes following a climate disaster, ambivalence sets in and Americans forget why these natural disasters have increased so dramatically in recent years. The good news, however, is that in the five minutes directly after losing a loved one in a hurricane, participants were much more likely to consider reducing their carbon footprint by taking public transit rather than driving.” The report estimated that the nation would have to suffer 34,000 consecutive natural disasters this month in order to garner significant support for climate change legislation.”

  3. rabiddoomsayer Says:

    While I don’t disagree with anything Antonia Juhosz said it is only one facet of demand collapse. Workers share of the GDP pie is no longer enough to sustain the economy.

    Average car age is increasing, so the existing fleet will be around for some time to come. Malls are shutting down, much faster than Amazon is growing. Homelessness is increasing quite quickly (yes I know the are some alternative statistics out there).

    New company formation is falling, despite all the claims of growth over the last decade or so.

    But no one ever wants to admit workers are simply not paid enough.

  4. redskylite Says:

    Well it would be good to see the sunset of the oil industry in my sunset years, and certainly the residents of Sydney are waking up, after the unfortunate deaths and loss of homes to unprecedented bush fire in this early season. Before we say goodbye to oil however – we need to completely replace coal.

    It’s by no means a done deal, but there are chinks and glints of hope dare I say good news, Bulletin of Atomic Scientists do.

    “Good news for climate change: India gets out of coal and into renewable energy”

    It’s a stunning change, and one that could have profound implications on the world energy market. While western countries continue to baulk at reducing their reliance on fossil fuels, India is accelerating its plans to lock in a sustained, aggressive reduction in the carbon emissions intensity of its economy. In fact, India’s prime minister, Narendra Modi, is targeting a fivefold expansion of the electricity generated from renewable energy sources by 2030—and this from a country that has already doubled its renewable energy in the past three years.

    https://thebulletin.org/2019/12/good-news-for-climate-change-india-gets-out-of-coal-and-into-renewable-energy/#

  5. redskylite Says:

    And after oil there is what do we do with our methane habit..

    The uncertain role of natural gas in the transition to clean energy.

    The study shows that in order for natural gas to be a major component of the nation’s effort to meet greenhouse gas reduction targets over the coming decade, present methods of controlling methane leakage would have to improve by anywhere from 30 to 90 percent. Given current difficulties in monitoring methane, achieving those levels of reduction may be a challenge. Methane is a valuable commodity, and therefore companies producing, storing, and distributing it already have some incentive to minimize its losses. However, despite this, even intentional natural gas venting and flaring (emitting carbon dioxide) continues.

    The study also finds policies that favor moving directly to carbon-free power sources, such as wind, solar, and nuclear, could meet the emissions targets without requiring such improvements in leakage mitigation, even though natural gas use would still be a significant part of the energy mix.
    .

    http://news.mit.edu/2019/role-natural-gas-transition-electricity-1216

  6. indy222 Says:

    If it’s cheaper, it’ll spur faster economic growth, faster total energy consumption globally, and great resource consumption to build all the new grid infrastructure – and Nature will take it in the groin that much harder and faster. Unless we cure the actual disease, these extra credit cards are only going to make the end come faster and worse. We’re all asking for “just one more fix, in the vein. Just one more. I promise! Then we’ll grow up and I promise to be good! Tomorrow. For sure!”


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