There has been a noticeable change in the reporting of global oil supply issues recently, although not locally. First I was quite surprised to see this article in the UK’s Daily Telegraph. Surprised because hitherto the Telegraph has largely run skeptical views on Peak Oil:
The clever, or coy, replacement of ‘peak’ with ‘plateau’ refers to the fact that global oil supply has been bouncing around on a bumpy plateau since 2005 despite the ever rising price signal from the market. Economics 101 says that this shouldn’t happen; increase in price should lead to an increase in supply. And as the years of no meaningful addition to supply keep accumulating it seems we really have met a geological limit to oil production. As the article points out:
‘The West has the disquieting experience of watching crude soar even as we languish in stagnation.’
And the reason for this is that ‘The West’ or the OECD, for the first time, is not the source of the demand that is driving the increase in price. Hence the reference to 125m Chinese cars, as this is the number of additional cars the article claims are due to hit Chinese roads over the next five years. This is a bit of an oversimplification as it isn’t just in China by any means where demand is growing but all over the developing world this is the case, including the countries that are net exporters of oil like in the Middle East. So much so they increasingly have a smaller quantity to export even where they are maintaining production.
Here’s a consumption graph, sure China and India are steadily growing, but look at that ‘non-OECD’ demand [including Chindia]. Soon to overtake the OECD as the biggest draw on world oil supply. This really is the beginning of a new era.
Note that there has been a decline in Europe and US, which largely reflects contracting economies. Also something of shame that Japan is not separated out here as post Fukushima they are the only sizable OCED nation to be increasing imports, but not because of a booming economy, quite the reverse, in order to replace the knocked out nuclear energy source.
So you can see why the title of the article with chart is called:
A great image illustrating a very sharp summary of the current situation:
The realization that oil prices aren’t about them anymore has been slow to dawn on Americans after a century of being the world’s swing consumers. But the fact is that the world’s developing economies have been outbidding the developed OECD countries for oil since 2005. Some time this year, non-OECD oil demand will overtake OECD demand, and they will stay in the driver’s seat for the remainder of oil’s reign as the lifeblood of the global economy.
Further, this new demand trend is already structurally baked-in. There is really nothing that America can do about it other than to consume less.
The sheer numbers of the global population using oil more efficiently will doom us to being the buyer of last resort under virtually any U.S. fuel economy standard. The roughly one billion people in the U.S. and Europe combined are now competing for oil with four billion people in Asia and over one billion more in Latin America, the Former Soviet Union and the Middle East. It’s like a tug-of-war with five people on one end of the rope and one on the other.
The article concludes with this sobering observation:
The conclusion should be obvious and indisputable: We’ll just hand over the keys. As I said last October, OECD economies should expect growthless stagnation at best. Oil has become a zero-sum market where the developing world’s gain will be the OECD’s loss. It’s time we woke up to the new reality of oil demand and acted accordingly. Not by imagining that we’ll be running more than 240 million slightly more efficient vehicles in the future, but by transitioning to rail and retiring them altogether.
The important point is that peak or plateau oil is not about oil suddenly running out but rather the competition for it heating up yet the supply not growing, and at some point beginning to decline. For The US this comes with the uncomfortable and no doubt to many unacceptable idea that they no longer call the shots in this vital market. At least in NZ we have never suffered from this burden but we are nonetheless just as vulnerable to being all but priced out of the oil market as this decade unfolds.
For now the appreciating NZ dollar has allowed us to stay slumbering on this issue as the international oil trade deals in USD, so the rising crude price has not meant reciprocal rises at the pump here. However this makes us doubly vulnerable as all it will take for $3/litre is for the NZD to settle down closer to its historical average with the USD. But then factor in any continuation of rising crude prices too and things could get very alarming very quickly. And all of this without anything special happening like Iran being attacked by the Israelis or any other above ground event [also, of course, possible].
The reason this isn’t understood as much as you might expect is that this is a very big departure from everyones’ experience, so despite seven years of stagnant production it just doesn’t fit with a lifetime of available oil and of the oil market’s responsiveness to the requirements of the West. Really big changes are not only not anticipated they are often not even accepted once they’ve happened. Welcome to the new century.
http://gregor.us/ [short and sharp]
http://www.theoildrum.com/node/8998 [shows role of high oil costs in Euros in current economy, good stuff in the comments here too esp. about US v. Euro train use]