France, Norway, Sweden headquartered Volvo are all about to do away with the use of anything to do with fossil oil. Such momentous decisions amongst others tend to vulgarise as it were all renewable forms of energy. Meanwhile, there has been over the years so much talk and speculation about oil peaking this or that year, that up to recently, scepticism prevailing, everyone went about one’s business fairly insouciant that as put by Javier Blas, writer of the proposed article of Bloomberg; “Some Big Oil executives expect demand for the commodity to shrink faster than anticipated, with dire consequences for Middle East producers.” Would It then matter as and when demand may top out before supply does or is it perhaps the other way around.
Here is a Middle East related excerpt of that article with our due compliments to the author and thanks to the publisher.
Remember Peak Oil? Demand May Top Out Before Supply Does
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For Middle East nations that sit on huge hydrocarbon reserves, peak demand is more of an existential threat. “If you have 100 years’ worth of oil reserves, then 25 years looks like a very short time frame,” says Martijn Rats, a Morgan Stanley oil analyst in London. Saudi Arabia and Kuwait depend on oil for as much as 90 percent of their income. They and other Middle East nations have used their oil wealth to provide their populations with well-paid employment in the public sector and generous handouts—a tacit social contract underpinning their absolute petromonarchies.
The current bout of low prices offers clues about how these countries would handle a permanent drop-off in demand. With oil revenues sharply down, Middle East producers are dipping into their foreign exchange reserves—Saudi Arabia has drawn almost $250 billion since mid-2014. They’re also borrowing more. The combined public debt of Bahrain, Kuwait, Oman, Qatar, Saudi, and the United Arab Emirates is set to jump to almost $800 billion by 2020, more than double its 2015 level, according to the International Institute of Finance, a group representing large banks. The situation is direst in such places as Nigeria and Venezuela, where corruption and mismanagement have drained state coffers.
BP’s Dudley and his counterparts at Total and Shell acknowledge that their forecasts hinge on many variables and could easily turn out to be wrong. And even if they’re right, oil consumption wouldn’t suddenly plunge; it might plateau for several years or begin a slow decline.
This view isn’t universal inside the industry. The International Energy Agency, which advises rich countries on policy, sees consumption growing steadily at least through 2040, the cutoff date for its long-term outlook. That’s also the view at Exxon. And Saudi Arabia and Russia, the world’s two largest oil exporters, don’t see a peak until 2050 at the earliest.
Others point out that a few years ago all the talk was of a peak in supply. Then new technologies unlocked fresh production, notably from shale formations in the U.S. “I’m very skeptical about peak oil demand,” says Bob McNally, a former White House energy expert and founder of Rapidan Group, a consulting firm. “The next big surprise is when we reach the peak of ‘peak demand’ talk and people realize that consumption continues to rise.”
Short-term trends back the view that peak oil consumption is a long way off. Last year global demand growth was 1.6 million barrels a day, above the 10-year average of 1.1 million.
Still, oil companies need only to look at the electricity sector for clues about how quickly technology can disrupt an industry. The U.K., for instance, marked a significant milestone this year: a 24-hour period in which not a single power plant burned coal, a first in 200 years. Despite its famously rainy weather, Britain at times gets 10 percent to 20 percent of its electricity from solar photovoltaic panels. Technology, some executives say, is the wild card. “The pace at which electric cars will be adopted could be surprising,” says Francesco Starace, CEO of Enel SpA, one of the largest utilities in Europe.
Philip Verleger, an energy consultant, thinks oil majors and oil-exporting countries are confronting a similar situation to the likes of Kodak, Polaroid, and Encyclopedia Britannica. “Sadly, these seem destined to make the same mistakes,” he says. —With assistance from Jack Farchy
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