IEA says 'peak oil demand' could hit as early as 2020 | RenewEconomy

IEA says ‘peak oil demand’ could hit as early as 2020

IEA says peak oil demand already in sight and could hit by end of decade, driven by high prices and shift to cleaner, cheaper options.


Little more that a year after the International Energy Agency added its voice to the chorus chiming that peak oil was dead, a new report from the uconservative adviser to industrialised nations suggests it has changed its tune. Only this time it is not peak supply that is on its radar, but peak demand.

The IEA’s Medium-Term Oil Market Report 2014 has predicted that global growth in oil demand may start to slow down as soon as the end of this decade, due to environmental concerns and cheaper alternatives, and despite boosting its 2014 forecast of global demand by 960,000 barrels per day.

oil compWhile supply is forecast to remain strong – thanks largely to the unconventional, or “tight” oil revolution currently underway in north America – the IEA says it expects the global market to hit an “inflexion point”, by the end of 2019, “after which demand growth may start to decelerate due to high oil prices, environmental concerns and cheaper fuel alternatives.”

These factors, says the report, will lead to fuel-switching away from oil, as well as overall fuel savings. In short, it says, “while ‘peak demand’ for oil – other than in mature economies – may still be years away, and while there are regional differences, peak oil demand growth for the market as a whole is already in sight.”

It’s worrying news for the over-invested and under-prepared; not least of all oil importing nations, to which, as Samuel Alexander noted in this article last September, the economic costs of peak oil are especially significant.

“When oil gets expensive, everything dependent on oil gets more expensive: transport, mechanised labour, industrial food production, plastics, etc,” he wrote. “This pricing dynamic sucks discretionary expenditure and investment away from the rest of the economy, causing debt defaults, economic stagnation, recessions, or even longer-term depressions. That seems to be what we are seeing around the world today, with the risk of worse things to come.”

This then adds to the peak oil cycle, increasing governments’ motivation to decarbonise their economies – better late than never – “not only because oil has become painfully expensive, but also because the oil we are burning is environmentally unaffordable.”

This view has been echoed in numerous recent reports. US investment banks Sanford Bernstein raised the prospect of “energy price deflation”, caused by the plunging cost of solar and the taking up of market share by that technology as it displaced diesel, gas and oil in various economies. It predicted that could trigger a massive shift in capital.

Analyst Mark Fulton last month also questioned the wisdom of the private-sector investing over $1 trillion to develop new sources of high-cost oil production.  While Mark Lewis, of French broking firm, suggested that $US19 trillion  in revenues could be lost from the oil industry if the world takes action to address climate change, cleans up pollution and moves to decarbonise the global energy system.

The IEA report also includes an updated forecast of product supply, which draws out the consequences of the shifts in demand, feedstock supply and refining capacity.

“Given planned refinery construction and the growth in supply that bypasses the refining sector, such as NGLs and biofuels, the refining industry faces a new cycle of weak margins and a glut of light distillates like gasoline and naphtha as a by-product of needed diesel and jet fuel,” it says.

It also predicts that “the unconventional supply revolution that has redrawn the global oil map” will expand beyond North America before the end of the decade, just as OPEC supplies face headwinds, and regional imbalances in gasoline and diesel markets broaden.

The report projects that by 2019, tight oil supply outside the United States could reach 650 000 barrels per day (650 kb/d), including 390 kb/d from Canada, 100 kb/d from Russia and 90 kb/d from Argentina. US LTO output is forecast to roughly double from 2013 levels to 5.0 million barrels per day (mb/d) by 2019.

“We are continuing to see unprecedented production growth from North America, and the United States in particular. By the end of the decade, North America will have the capacity to become a net exporter of oil liquids,” IEA Executive Director Maria van der Hoeven said as she launched the report in Paris. “At the same time, while OPEC remains a vital supplier to the market, it faces significant headwinds in expanding capacity.”

Beyond ageing fields, the major hurdle facing OPEC producers is the escalation in “above-ground woes,” as security concerns become a growing issue in producers like Iraq, and investment risks deter investment and exploration.

The report notes that as much as three-fifths of OPEC’s expected growth in capacity by 2019 is set to come from Iraq. The projected addition of 1.28 mb/d to Iraqi production by 2019, a conservative forecast made before the launch last week of a military campaign by insurgents that subsequently claimed several key cities in northern and central Iraq, faces considerable downside risk.

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  1. ttman 6 years ago

    I think the IEA is preparing themselves an excuse. 10 to 14 years ago they were forecasting a steady increase in production into the 2030’s, with the price never exceeding $50 per barrel. The price has clearly been succeeded, and it is extremely unlikely production will increase through 2030 as they had also forecast. Conventional crude oil production peaked in 2005 (world total liquids production increasing due to NLGs, tar sands and US fracking), and with the EIA predicting US shale oil production to peak in 2019, the odds favor world production going into terminal decline in 2019.

    So if production declines – because Peak Oil has been reached – they don’t have to acknowledge they were wrong about Peak Oil. They can say that it is demand that is declining and production has gone down because of that.

  2. ttman 6 years ago

    “By the end of the decade, North America will have the capacity to become a net exporter of oil liquids”

    Where is that coming from? Doesn’t appear to be even close to the truth. The US in 2013 used 18.89 million barrels per day. The article thinks shale oil will double to 5.0 million barrels per day. Well then non-shale oil is certainly not going to get us to more than 18.89 billion barrels a day. Non-shale oil is in terminal decline and the combination of it, plus natural gas liquids and a few other things, along with shale oil is just now approaching 10 million barrels per day. If shale oil goes up 2.5 million a day, that would only be 12.5 million a day, and that would require non-shale oil to remain constant, an unlikely event given the past history of a peak in 1970.

    • jesse 6 years ago

      Ur ignoring Canada and Mexico both net exporters and both the biggest crude suppliers to the US and both in North America

      • ttman 6 years ago

        D’oh! I somehow overlooked the North America part. But I tried to see how much Mexico exports and I found an EIA graph for net Mexican exports that goes to from 1980 to 2013 and they have come way down from what they once did, although from 2011 to 2013 it is starting up.

  3. tony okrongly 6 years ago

    That’s funny. IEA basically says “world oil didn’t peak… we are just going to use less of it from now on… it’s a choice.” The result of “abundant oil”, lower oil use, lower GDP growth, lower population growth, sky high prices, zero growth in oil production outside of the U.S. (short lived) fracking boom.

    This is the same thing that the BP 2030 oil outlook says. Basically the North America will become energy independent (with the U.S. using the lion’s share of North American energy) because we are going to be using 20% less energy in 2030 than we do now. I have no doubt that is 100% possible. With demographic changes and the fact that the U.S. wastes massive amounts of energy, it shouldn’t be hard. But don’t say peak oil isn’t the reason. Peak oil costs are the reason for peak oil demand.

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