
Energy Giant Shell Says Oil Demand Could Peak in Just Five Years - Osiris30
http://www.bloomberg.com/news/articles/2016-11-02/europe-s-biggest-oil-company-thinks-demand-may-peak-in-5-years
======
caseysoftware
"Peak Oil" generally refers to peak oil _production_. This article is about
peak oil _demand_.

Overall, this should be considered a _good thing_.

As people convert to alternatives which are cheaper - due to renewables
improving - the demand for oil in some industries decreases. Which then drives
further innovation into those areas and further alternatives. In fact, this is
exactly what critics of peak oil have been saying for years.

(This isn't saying demand for oil will go to zero, just that it is likely to
start decreasing.)

~~~
ThomPete
It is a good thing on the long run but 3-4 trillion debt is tied up in fossile
fuel economy. If that transition happens too fast thsts not a good thing.

~~~
MrsPeaches
Very interesting. Do you have a source for this?

~~~
simonh
The idea is that carbon fuel dependent industries, which is a lot of
industries and infrastructure, have issued vast amounts of debt to fund
investment and medium to long term expansion and operations. If the transition
to e.g. electric vehicles and solar power generation happens rapidly many of
those investments will become massive liabilities and the debt will go bad.
This would also lead to a crash in oil prices, so only the cheapest producers
would be viable, leaving the rest sitting there on huge oil production
infrastructure rusting away, with even more bad debt it will never be able to
repay.

I'm not sure how likely/unlikely this is, but that's the theory.

[https://www.theguardian.com/environment/2014/mar/06/could-
fo...](https://www.theguardian.com/environment/2014/mar/06/could-fossil-fuels-
melt-the-global-economy-carbon-bubble)

~~~
flippyhead
This does frighten me. It seems that a great example of one of the many risks
of this kind of problem is Donald Trump or the like.

~~~
tjic
You're arguing that the problem with Donald Trump is that he's too green
and/or too into creative destruction, and will cause the oil industry to
implode?

Hm.

~~~
klipt
No, I think the implication is that if oil workers lose their jobs, while
Trump promises to "make oil great again" (he's certainly threatened to cut
funding for green energy), oil workers might vote for Trump.

~~~
ConroyBumpus
There is a very high likelihood that this has already happened, and the voting
will follow in the next day or so.

------
diafygi
There's a great report from the UK that analyzes the losses of stranded fossil
assets if we're to hit our climate change goals. It says that in order to cap
at 2C warming we can only pull up 1/4 of our existing proven reserves, and
only 1/3 to cap at 3C. That means stranding over 2/3rds of our fossil assets.
Also, the situation heavily favors producers who have cheap assets, which are
mostly sovereign producers in the middle east. The private producers like
Shell end up having to strand way more than 2/3rds because the get pushed out
due to low prices.

[http://www.carbontracker.org/report/carbon-
bubble/](http://www.carbontracker.org/report/carbon-bubble/)

[https://en.m.wikipedia.org/wiki/Carbon_bubble](https://en.m.wikipedia.org/wiki/Carbon_bubble)

~~~
taneq
> It says that in order to cap at 2C warming we can only pull up 1/4 of our
> existing proven reserves, and only 1/3 to cap at 3C.

This is assuming that the extracted oil is burned, though, right? If a new
industry emerges making, say, huge plastic spaceships, then it may still be
profitable to extract all the oil we can get.

~~~
diafygi
Only about 7% of oil isn't burned. So you'd have to grow the plastics,
asphalt, etc. industries by 10x to make up for the 2/3rd stranded assets.
That's a lot of plastic spaceships and parking lots.

[http://energy.gov/articles/hows-and-whys-replacing-whole-
bar...](http://energy.gov/articles/hows-and-whys-replacing-whole-barrel)

~~~
Animats
It's not like we have to use all the oil in the planet this century. Saving
oil for making plastics and other useful products makes sense.

~~~
wastedhours
Interesting question, is it better to mine it now and store it, or tear down
the industry and rebuild it if we come to need it again in the future?

~~~
wiz21c
I once read an article explaining that storing oil is definitely not easy.
IIRC, it was super toxic, abrasive, could easily be set on fire, and of
course, super valuable => you need almost a bunker to store it...

------
cheeseprocedure
I really miss The Oil Drum.

Can anyone recommend sources for news/analysis from the energy industry?

~~~
namenotrequired
I like Jeremy Leggett's monthly "State of The Transition". Note, the author is
firmly in the renewable sector, so not exactly unbiased.

The latest: [http://www.jeremyleggett.net/2016/11/state-of-the-
transition...](http://www.jeremyleggett.net/2016/11/state-of-the-transition-
october-2016-as-the-paris-agreement-enters-into-force-momentum-in-the-great-
energy-system-change-continues-to-outpace-setbacks/)

~~~
kinj28
Check on App Store for DronaHQ ins

~~~
kinj28
Dronahq insight

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glbrew
AKA "Oh don't worry about regulating us and protecting the environment, it
will naturally happen in five years when your need for us will surely peak!"

~~~
themodelplumber
Or AKA "Oh hey look at us, we're the weak guys now! We need all the assistance
we can get!"

~~~
woodandsteel
Did you read the article? Shell said "we are going to be fine, because we are
switching our business to things natural gas and biofuels"

What most petroleum companies say, as the article indicates, is that oil
demand is going up for a good while longer. That's because if the idea gets
around that demand is going to peak, they won't be able to borrow the gigantic
amounts of capital they need to keep drilling new wells.

~~~
sinxoveretothex
> That's because if the idea gets around that demand is going to peak, they
> won't be able to borrow the gigantic amounts of capital they need to keep
> drilling new wells.

Alternative hypothesis: it's simple denial, much like Nokia and more recently
RIM.

~~~
mikeash
Alternative alternative hypothesis: they're correct, because the move towards
renewable energy and electrified transportation is more than offset by
increased oil consumption caused by economic growth in poor countries.

~~~
woodandsteel
I don't understand that idea. From what I understand, most oil is used for
transportation, so if EV's get cheaper than ICE, which it seems is going to
happen in less than a decade, won't all the newly-prosperous developing world
people buy EV's instead?

~~~
mikeash
I'd be surprised if it happens that quickly for the low-end cars that newly-
prosperous people in third-world countries would buy. Even if it does,
insufficient electrical infrastructure might get in the way. In any case, I'm
not saying it _must_ happen this way, only that it's a possible basis for such
a prediction that doesn't rely on oil companies being stupid or duplicitous.

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Fr0ntBack
If we implemented a carbon tax which makes oil producers pay for the
environmental cost of oil, oil demand would probably peak even sooner.

~~~
ZeroGravitas
The oil producers are actually calling for a carbon tax, and have been for a
while. It's the american coal industry, and their influence on the rest of the
fossil fuel industry that's holding it back.

[http://www.bp.com/en/global/corporate/press/press-
releases/o...](http://www.bp.com/en/global/corporate/press/press-releases/oil-
and-gas-majors-call-for-carbon-pricing.html)

~~~
nickjarboe
Looks like the market cap for US traded coal companies is only $4 billion[1].
Maybe a US multi-billionare could buy them out as a philanthropic act and
reduce mining to only that needed for chemical stock.

[1][http://markets.on.nytimes.com/research/markets/usmarkets/ind...](http://markets.on.nytimes.com/research/markets/usmarkets/industry.asp?industry=50111)

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martin_bech
Curious note, Shell has at least in Denmark sold or closed all of its gas
filling stations. source [http://www.business.dk/transport/shell-saelger-
danske-tankst...](http://www.business.dk/transport/shell-saelger-danske-
tankstationer-til-statoil-ejer)

~~~
enibundo
Because countries like Denmark, Holland, Finland, etc. are very conscious
environmentally speaking. I love these places.

~~~
Scarblac
Holland absolutely isn't, we hardly do anything about our CO2 production.
Possibly the worst in the EU. We opened a new coal electricity plant in 2016!

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mrfusion
The Stone Age didn't end for lack of stones.

~~~
mikeash
The Bronze Age may well have ended for lack of bronze (or more specifically
lack of fuel for making bronze) though.

~~~
pilom
I'd love to read more about this if you have a source?

~~~
mikeash
From the Wikipedia article:

"The Aegean Collapse has been attributed to the exhaustion of the Cyprus
forests causing the end of the bronze trade. These forests are known to have
existed into later times, and experiments have shown that charcoal production
on the scale necessary for the bronze production of the late Bronze Age would
have exhausted them in less than fifty years."

[https://en.wikipedia.org/wiki/Bronze_Age#European_timeline](https://en.wikipedia.org/wiki/Bronze_Age#European_timeline)

I don't know enough about the subject beyond what's there to say how accurate
it is, but it's a place to start.

~~~
qbrass
I'd be surprised if iron production required less fuel than bronze did.

Seems like lack of tin may have been an issue keeping them from making bronze.

~~~
mikeash
Could be. Another possibility is that iron was found in other places where
fuel was more abundant. I'm totally speculating though.

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siculars
Whether it is 5, 15 or 50 years hence, peak oil demand will surely come.
Technological innovations will see to that. The question I have is what will
that mean for all our friends in OPEC nations? Venezuela is in most estimates
already a failed state and thats simply due to mismanagement. What happens
when structured demand erosion starts to take hold and no amount of state
level management can stop it? For those who say poverty breeds desperation
breeds terrorism (which I don't ascribe to) we'll no doublet be in for a few
volatile decades indeed until it all gets sorted.

~~~
MarkMc
If we take Nigeria as an example: Their oil industry is worth about 10% of GDP
[1] so if it were to halve in, say, 20 years you are looking at a drag of
0.25% GDP per year. And since oil profits mostly benefit only an elite group
of kleptocrats, the average Nigerian will hardly notice the effect. In fact,
it may be beneficial for Nigeria because it would greatly reduce the 'resource
curse' and force government to be more accountable to the people [2]

[1]
[http://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS](http://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS)

[2]
[https://en.m.wikipedia.org/wiki/Resource_curse](https://en.m.wikipedia.org/wiki/Resource_curse)

~~~
sqeaky
Rich people hate losing their money. I do not know how, but I am sure the
average Nigerian would feel the effect somehow. It could take any form but one
I thought of is some kind of contrived import tax could be created to
'encourage' to locals to buy local oil instead of foreign solar panels.

------
mrfusion
Don't the current low oil prices suggest we've already hit peak demand?

~~~
ruilov
Normally people use the term "demand" to mean a curve, which is a function of
price. In an efficient market (a good approximation for the oil market), the
price solves for the equilibrium between supply and demand. The quote in the
article, "demand will peak before supply", is meaningless. It's not wrong,
it's just not saying anything.

The fact that the price has come down in the past couple of years means that
either demand has shifted down (that is, keeping the price constant, people
demand less) or that supply has shifted up.

On the demand side, it's unclear to me, I'd appreciate any pointers others
would have. While advanced countries get more efficient with their use of
energy, emerging economies are increasing their demand as more people escape
poverty.

What is clear is that the supply curve has shifted up. Both because of
technological improvements in the U.S. in fracking, and due to political
improvements in countries like Iran, Iraq and Nigeria.

~~~
wiz21c
Oil demand in relation with oil price...

[http://energie-climat.obspm.fr/local/cache-
vignettes/L500xH3...](http://energie-climat.obspm.fr/local/cache-
vignettes/L500xH306/petrole_elastique_graph1-6aaf1.jpg)

------
magoon
In my lifetime I have learned that the only prediction I can believe regarding
peak oil is that there will always be another prediction about peak oil. I'm
not saying it's not gonna happen (or hasn't), just that it's been said so many
times before.

~~~
crpatino
PeakOil-the-movement shares the same strenghts and weaknesses of many other
engineering spawns: The stuff they predicted got all the technical details
correct to a remarkable degree, yet they failed to grasp the economic and
political implications, and made a communication fiasco out of it. I find it
very sad and ironic.

I'd urge you to not throw the baby out with the bathwater. I can share that I
have taken life decisions under the assumption that resource depletion will be
a real socioeconomic force during the second half of my life; yet you will
notice that ditching my programming career and moving to an organic farm in
the middle of nowhere were not among those decisions (yet).

~~~
ux-app
mind sharing the decisions you have made and followed through with?

~~~
tbihl
Not who you asked, but the two biggest questions that I ponder along this
line: (1) How can I preserve some of my savings in real assets so that they
won't evaporate when the bond market finally crashes and takes the dollar with
it (probably a few crashes from now)? (2) Given the nature of just-in-time
logistics and our complete dependence on trucks, will I be somewhere that I
can limp along once oil hits a price that makes that all infeasible? Or will I
be a sitting duck, waiting to die of hunger, thirst, or heat exhaustion? And
(3) am I preparing myself with skills outside of work that will help me
sustain myself when I have to work a little bit lower down Maslow's pyramid
(first and foremost, maintaining fitness?) I don't work in programming at the
moment, but my job ceases to exist if we lose our ability to have high-
precision manufacturing and logistics chains spanning an entire continent.

~~~
pjc50
"Be a Westerner" is quite a good place to start for all of those, nonetheless.

I suspect the "decline" looks a lot like the intermittent de-industrialisation
we've already been seeing. There are plenty of towns which have lost their key
industry without replacement, so they're just kind of limping along. The
burden of decline will fall mostly on those already at the bottom.

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legohead
Is this our yearly "oil is running out" journalism run?

~~~
mcv
It's not "oil is running out", it's "demand for oil will drop", which is the
other side of the equation, and definitely a good thing (except for oil
companies that don't prepare for it).

------
monkmartinez
If we know anything, it is that these guys (energy industry) are pretty
terrible about predicting much of anything. Ironically, it was an engineer at
Shell that started "Peak Oil" in the 50's... one, M. King Hubbert.

Maybe monster trucks will take over as the prophecy of the film Idiocracy come
true and oil stages a massive come back... you heard it here first!

~~~
mrnzc
I think you have to distinguish between Peak Oil (point in time where there is
the maximum rate of extraction) and "Peak Demand", which is what the article
is about.

Furthermore, Shell is actually well-known for its effective foresight
activities (particularly in the 70s). Maybe because they switched from
forecast to foresight...

