
When oil is no longer in demand - hourislate
http://www.economist.com/news/special-report/21710634-glimpse-post-oil-era-when-oil-no-longer-demand
======
shanemhansen
I live in Utah and I can tell you exactly what happens when oil is no longer
in demand. They offer numerous tax breaks per well to encourage exploration
and increase production. I believe the term is "corporate welfare". One of the
tax breaks has a stated goal of providing tax relief when oil prices are low.
[https://oilgas.ogm.utah.gov/pub/Publications/Lists/tax_incen...](https://oilgas.ogm.utah.gov/pub/Publications/Lists/tax_incentives_IOGCC.pdf)

This is the same government attempting to roll back solar tax credits because
they insist that the solar industry needs to stand on it's own 2 feet and
compete in the "free" market.

~~~
edblarney
'Tax breaks' are offered to all sorts of industries.

Almost all entertainment in Canada for example, is done nearly tax free.
Pharma, energy, small business etc. etc..

~~~
graeme
It's particularly perverse, however, to give tax breaks for an industry that
has immense negative externalities.

~~~
edblarney
Oil companies don't emit a whole lot of CO2.

You emit the CO2 when you use your car (almost 50% of CO2 emissions are from
autos).

And a bunch of other industries are responsible for most of the rest of CO2
emissions.

~~~
monknomo
I think you're missing the negative externalities inherent in oil extraction,
like groundwater pollution, earthquakes, above ground pipelines, etc.

Not to mention it's a little like saying Pablo Escobar doesn't OD on drugs or
steal your TV very often, it's the crackheads that do that...

~~~
edblarney
" like groundwater pollution, earthquakes, above ground pipelines, etc"

Groundwater pollution and earthquakes are rare, and the latter are minor and
have negligible impact. It's no more problematic than most other extraction
industries.

'Above ground pipelines' are completely benign entities with almost zero
environmental impact. Leaks are rare enough, and most of them are very minor
and easy to clean up. Oil is an organic product, found commonly in nature, and
small amounts of Oil spilled have no real impact. Unlike the big tanker
spills, which can be devastating.

The highway you drive your car on has considerably more environmental
footprint than any 'above ground pipeline'.

~~~
edblarney
I wouldn't want a coffee shop 'in my backyard' and I have nothing against
coffee shops.

But if I had to chose between an Oil Pipeline and a 'highway' \- I (and I
think most people) would chose the Oil Pipeline any day of the week.

You do realize they are quite common? And that natural gas pipelines - which
carry the same carbon-based materials run everywhere in urban areas - and that
there's a good chance there is a gas pipeline, literally, in your backyard
right now?

If you are living in an urban area, my guess is there is an 80% chance there's
a carbon-based pipeline within 500m from where you are.

~~~
maxerickson
The Energy Information Agency has a nice map of them:

[http://www.eia.gov/state/maps.cfm](http://www.eia.gov/state/maps.cfm)

(turn off some layers to make it easier to look at)

I guess that's transportation pipelines and not distribution pipelines though.

~~~
edblarney
That's a cool map. Pipelines are everywhere :). And yes, those don't include
distribution which are nearly ubiquitous in many places.

------
izend
Total World Consumption (2017 projection) : 96.92 million barrels per day (up
from 92.58 million barrels in 2014)

EIA outlook:
[http://www.eia.gov/outlooks/ieo/world.cfm](http://www.eia.gov/outlooks/ieo/world.cfm)

Oil will be in demand for a long time. The demand might peak but headlines
like this seem to indicate oil isn't needed anymore.

Most people do not realize that 6-7 million barrels of oil per day must be
found year over year to replenish the depletion of old oil wells. This
requirement will drive exploration and investment.

~~~
melling
Yeah, it's crazy that people think oil is going away. We're 7 billion people
on our way to 9 billion, with another billion in the next 15 years. That
fossil free future that we dream about isn't getting any closer. Those big
solar plants, etc that we read about are a rounding error.

~~~
moomin
You're right. The price going down has, I think, more to do with the effect of
fracking in the US. It's getting to the point that the US could be an exporter
if it changed its laws.

The effect of petro-states will be much the same, though.

~~~
ARothfusz
We are an oil exporter. We did change the laws.
[http://money.cnn.com/2016/06/06/investing/us-oil-exports-
inc...](http://money.cnn.com/2016/06/06/investing/us-oil-exports-increase/)

~~~
moomin
I missed that. Thanks for the correction.

------
stuartalex
A web developer from Aberdeen here.

The transition from wealthy to poor in Aberdeen has been instantaneous.
Everyone I know in the city has been affected—my fiancee was made redundant,
my Dad (after 25 years at BP) and my best mate’s dad (after 25 years at Shell)
too.

I studied CS at Robert Gordon University, which is cutting academic staff. I
also worked at a design and dev shop, but that went bust in December last
year.

It’s actually a really bleak time, but this outcome was avoidable.

Although my friends and family all live in Aberdeen, I feel like I can’t
sustain myself there. I currently live in Wellington, NZ, which is beautiful,
vibrant and diverse.

~~~
cr1895
Have you noticed any pick-up from the offshore wind industry? There's
certainly some overlap between oil and wind industries, and Scotland is doing
quite a lot of offshore wind development nowadays.

~~~
stuartalex
Nah, unfortunately not.

Scotland in general is very well placed for renewable energy, with both great
geography and skilled labour. I feel like the businesses based in Aberdeen
haven’t realised that opportunity though.

The local industry has been a one-trick pony with no ambition to diversify.
The end result is what we’re currently seeing.

------
solarsavior
I was wondering about this lately as I live in Houston in an area greatly
dependent upon oil and gas. What happens when so many vehicles are charged by
solar panels on rooftops (Tesla Energy)? What about oil and gas? Well, it
turns out that tons of things are made from oil and gas and once we stop
burning it to make vehicles go down the street, we can start using it for
other things.

I'm unable to find the origin of the "burning Picassos for heat" quote, but it
is catchy.

"An oil executive once observed that burning oil for energy is like burning
Picassos for heat. Oil is extraordinarily valuable as the basis for so many
products we use every day that the thought of simply burning it ought to be
unthinkable. So versatile are oil molecules that they can be transformed into
substances that serve as clothing, medicines, building materials, carpet, skin
care products, sporting goods, agricultural chemicals, perfumes, and myriad
other products."

[http://www.resilience.org/stories/2012-11-04/burning-
picasso...](http://www.resilience.org/stories/2012-11-04/burning-picassos-for-
heat-why-we-need-to-electrify-transportation)

I can foresee things like plastic wood being used to build all sorts of
things.

~~~
dx034
As pointed out in another comment, the use of oil for plastics, streets, etc
is less than 5% of overall oil consumption in the US. You could get that kind
of output with a tiny domestic industry. With modern refineries, you can get a
good control over the output mix and only produce what is needed.I think
Houston would be hugely affected by a decline in the oil industry. Even if
they can create jobs in the production of renewables, the job profile is often
different from working at wells and the huge shipping sector would be largely
non-existant.

So even if we increase plastic consumption by 2x (don't really see where that
should come from), it's still a potential decline in oil consumption of 90%.
Enough to basically destroy several industries (refining, drilling, well
maintenance, pipelines, shipping).

Another interesting question is regarding gas stations. You'll still need some
stations on interstates to re-charge for long distance trips. But you could
basically get rid of all of them in cities. They would continue to exist as
convenience stores, but probably with half the number of employees. This would
be another huge sector that often employess untrained people, many of whom
will likely not be qualified enough to work in battery factories.

Link to EIA report:
[http://www.eia.gov/energyexplained/index.cfm?page=oil_use](http://www.eia.gov/energyexplained/index.cfm?page=oil_use)

~~~
solarsavior
Fair enough, a "potential decline in oil consumption of 90%". I get that. I
accept that. It is a potential though; based upon existing technology. The oil
and gas industry will be impacted (perhaps severely), but will it be a 90%
impact? I doubt it. Few people have ever been able to predict the future.
(Xerox failed, IBM failed, Yahoo failed, etc. - AT&T did a good job with "You
Will" \- Think it was a research firm that did it for AT&T.) Don't fall into
the trap of thinking one knows how it will all play out. Odds are it will not
play out like one thinks it will. The same technological advances that are
removing industries are creating other industries. I just think the oil can be
used for much more interesting things. 3D printing is really in its infancy
right now. [https://all3dp.com/biggest-3d-printers-
world/](https://all3dp.com/biggest-3d-printers-world/) Imagine being able to
print out whatever you want, including buildings and having them perfect. (not
some nailed together wood done in a rush that has tons of joints where
problems may arise) Raw material (oil) will be needed to do that. (unless of
course there is other material to use, but it will have to be refined and oil
& gas companies know all about that)

Now the employment of people is the other thing. Technology should make things
cheaper and better. (cheaper either in initial price and/or the cost of
maintenance) Fewer people will need to work and/or work fewer hours because
things are cheaper and better. There was a time before there were two-income
households. We could cut back to that without a huge disruption. An
equilibrium will likely develop. If there is no income, there will be no
consumers. Basic income may also be needed.

On a more funny note, those convenience stores had better well have some damn
good restrooms like they have at Buc-ee's. Otherwise, why stop? The car is
doing the driving. You're free to eat whatever you brought or simply sleep
through the trip.

------
205guy
Interesting that the Economist is looking at a future where oil demand is
lower, but that realization hasn't hit the public yet, at least not in the US.
I have been thinking about the Standing Rock protests in North Dakota, and
they are objecting to the environmental risk of pipelines. But in the big
picture, oil is getting more expensive to extract, more dangerous to ship, and
contributes to global warming then used. Given electric cars, some fueled from
solar power, there could really be a time soon in the US when the whole
gasoline industry is reduced to almost nothing.

I think the concept is in the back of many poeple's mind, but the status quo
is dominant and electric-everything on the road seems futuristic still. But as
more and more people try electric cars and install solar panels, more people
will see it and accept it as the new normal, and then things could change
quickly, within 5 years perhaps.

And yes, this comment is intended to speed up that change.

~~~
handedness
> But in the big picture, oil is getting more expensive to extract, more
> dangerous to ship, and contributes to global warming then used.

These assertions don't match the reality of what's happening.

The cost to extract oil has plummeted, and that's reshaping the world order.
It's destroyed Russia's entire financial plan.

In the US it's become far safer to ship. US domestic production has increased
to the point of effective independence, and the US no longer depends on the
Strait of Hormuz for its energy supply. Oil's vastly easier to move than
natural gas. Current natural gas production exists as a byproduct of shale oil
production.

It's also becoming far cleaner to extract. The progress shale has made in just
a few years is astounding. The extraction methods used today are orders of
magnitude cleaner than the ones used just a few years ago.

Known domestic supplies are also increasing exponentially, which means the
industry is highly unlikely to be "reduced to almost nothing" any time soon.
The cheapest form of energy always wins, and even incentives and penalties can
only somewhat mitigate that.

Sure, we'll have self-driving electric cards on the roads soon enough, but
most of that energy isn't going to come from nuclear power, solar, or wind
sources.

This landscape is changing quickly, and a lot of assumptions people
hold–assumptions that are based on many decades of reality–aren't true.

Here's a lecture that's relatively current (though 9 months is nearly stale
given how quickly shale tech is progressing), and does a decent job of
outlining the situation:

[https://www.youtube.com/watch?v=pyfVTBI4dgA](https://www.youtube.com/watch?v=pyfVTBI4dgA)

~~~
ArkyBeagle
I just finished a (realtime systems programming) job at an oil services
company. I wouldn't expect a lot of progress in shale tech, especially at
present natural gas and oil prices.

The oil industry in general has a very skewed vision of what "technology"
means. It tends to mean PLC programming, and PLCs are a really weird, small
market. It tends to mean systems integration of a rather crude order.

------
stoic
The recent market conditions are more a consequence of changes in supply than
in demand.

I heard someone refer to something called the "Economist effect", where an
article in the Economist about a particular trend signals its end.

Sure enough: [https://www.bloomberg.com/news/articles/2016-11-30/opec-
said...](https://www.bloomberg.com/news/articles/2016-11-30/opec-said-to-
agree-oil-production-cuts-as-saudis-soften-on-iran)

e: word order

~~~
PhantomGremlin
_the "Economist effect"_

It's real. Someone on HN mentioned them as a contra-indicator during a
previous discussion.
[https://news.ycombinator.com/item?id=12516078](https://news.ycombinator.com/item?id=12516078)

My supporting argument to him was that The Economist argued in 1999 that $10
oil was too expensive and that it could be headed to $5. So of course oil rose
to $140 over the next decade!
[https://news.ycombinator.com/item?id=12517258](https://news.ycombinator.com/item?id=12517258)

~~~
dx034
You can replace that with any newspaper reports. The oil price follows in part
a pork cycle, so a period of falling prices will likely lead to a sharp
reverse at some point (and vice versa). Once you have enough data supporting
the lower price regime, oil will likely spike again.

The interesting question is if it's gonna be different this time. Many argue
that with shale production supply will be much more elastic, but it could also
just be a false lead.

Pork cycle:
[https://en.wikipedia.org/wiki/Pork_cycle](https://en.wikipedia.org/wiki/Pork_cycle)

------
ghouse
Resource extraction companies (oil, mining, etc..) usually are required to
post security for reclamation. However, large companies are permitted to not
post cash or bond, but on their word (credit). Which works while commodity
prices are high. But when prices crash, so do the companies and society (the
tax payer) is left holding the bag for cleanup.

------
jpatokal
The title exaggerates. Charts elsewhere in the same report project demand
going from the current ~4.2bn tonnes to anywhere between 3.2 to 4.7bn by 2040,
meaning demand may actually _increase_ over the next 25 years.

[http://www.economist.com/news/special-
report/21710628-worlds...](http://www.economist.com/news/special-
report/21710628-worlds-use-oil-approaching-tipping-point-writes-henry-tricks-
dont-expect)

------
vegabook
A few counterpoints:

* In the market oil is a very popular short. So much so that despite Iran coming back onstream, oil has since risen 20 points.

* Aramco's IPO will force it to open kimono on its reserves. Is there a negative surprise waiting there?

* Nobody is going to put electric cars into the southern hemisphere anytime soon, because the distances are too long and infrastructure too sparse. As Africa develops, oil demand there will increase, especially with increasing chinese involvement. Ditto Latam. Ditto central Asia, Middle east.

* We are seeing inflation picking up around the world, and oil is the classic inflation trade.

Finally, anecdotally, the economist has a long history of being a counter-
indicator due to its susceptibility to consensus thinking.

------
peterjlee
I wonder what will happen to the price of jet fuel once electric cars are wide
spread. Petroleum production will go down as demand for gasoline will go down
while jet fuel demand will probably remain similar. So will that lead to a
rise in jet fuel price?

~~~
mjevans
Probably temporarily. It'll likely cross a point where more synthetic
production methods reach economic viability.

The field requires such a great energy density that I suspect only a
remarkable breakthrough in energy density for weight would allow a fully
electric solution. Hydrogen is also likely out as the storage cells would be
under unimaginable stresses.

In the long term it might actually incentivize the creation of moderate/high
speed rail lines in the US.

~~~
coredog64
Unless someone figures out how to bulldoze the Rocky mountain range, high
speed rail as a replacement for coast to coast air travel is a non starter.

~~~
rm_-rf_slash
The real transit corridors are Boston-Atlanta and New York-Chicago, as well as
Seattle-San Diego on the west coast. Coast to coast would be nice but even
just those would be an enormous boost to our transport infrastructure and
potentially a huge emissions cut (depending on where the power comes from).

~~~
Gibbon1
The high speed part of the California high speed rail is mostly to relieve
congestion at the coastal airports. Idea being that passengers flying between
the Bay Area and LA/San Diego will instead take the train. Hardest part of
that is it'll require a number of tunnels, one 14 miles long, through the
mountains into the LA Basin.

------
Mao_Zedang
If oil is no longer in demand it will trigger the biggest mass migration from
the middle east to the west the world has ever seen. These countries import
90% of their food, food which they pay for with oil income.

~~~
UniversalBlue
Yeah, because we need more "refugees". As if the ones we already got haven't
caused enough damage.

~~~
majewsky
Europe will get refugees regardless of its need for them, in the same way that
we got climate change without needing it.

What we're debating is not the "if", it's what to do with them. The most
endorsed answer thus far seems to be letting them drown in the Mediterranean
Sea.

------
gadders
I think the best thing of oil no longer being in demand is the US and the UK
could end their relationships with Saudi Arabia, and hold them accountable for
the vile regime they run there.

------
nateburke
As long as we have ground wars, we'll have demand for oil (i.e. gasoline). As
an energy source, stored gasoline is far more modular and transportable than
anything requiring the electric grid. Consequently, it is easier to defend and
remains the ideal energy solution for supply lines in battle.

As long as we have air wars, we'll also have demand for oil. The logistics of
moving an airforce around the world require floating airfields doubling as
standalone fueling stations. How efficient would solar need to be for an
aircraft carrier + all of its planes to run on solar?

As long as we have wars fought on the open seas... you get the idea. Oil, as a
power source, moves quite easily and this cannot be ignored, strategically.

Militaries and governments know this. As long as we have physical borders that
need to be defended, we'll have a demand for oil.

~~~
kerbalspacepro
George Friedman describes a ~2030/2040 military that uses batteries in power
armor that are recharged by solar power satellites.

------
thirstysusrando
Hubbert's Peak

"World oil production will start to fall sometime during this decade, never to
rise again. In 1956, M. King Hubbert predicted that U.S. oil production would
peak in the early 1970's. Although Hubbert was widely criticized by some oil
experts and economists, in 1971 Hubbert's prediction came true. The 100 year
period when most of the world's oil is being discovered became known as
"Hubbert's Peak". The peak stands in contrast to the hundreds of millions of
years the oil deposits took to form. Hubbert's methods predict a peak in world
oil production less than five years away."

[http://www.princeton.edu/hubbert/the-
peak.html](http://www.princeton.edu/hubbert/the-peak.html)

~~~
mdpopescu
> Hubbert's methods predict a peak in world oil production less than five
> years away.

According to the wayback machine [1], that page was first written in 2001.

[1]
[https://web.archive.org/web/20011121173642/http://www.prince...](https://web.archive.org/web/20011121173642/http://www.princeton.edu/hubbert/the-
peak.html)

------
Chuckalucky89
This discussion should really come to the forefront of the energy conversation
in the US with the Trump presidency. His commitment to ramping up oil
production and reversing all of the initiatives to increase investment in
alternative, sustainable energy resources will hurt the US' progress towards
relying less on fossil fuels which are not sustainable. His motivations are
obviously to prioritize the big oil companies making money.

------
hkmurakami
As the developing world develops, demand for petroleum based products
(plastics, and even some paper products) will certainly rise, even if power
plants and transportation moves away from fossil fuels.

Demand will never go to zero even if our energy needs our met renewably. I
wonder what the ratios will be though.

~~~
XorNot
Usage in plastics is a tiny highly substitutable use compared to fuels.

A realignment where it becomes a buyer's market for oil will be a massive
change to the status quo.

------
codecamper
Why does pumping CO2 under water not sound as stable as having carbon locked
in a petrochemical under the ground?

------
plg
water

------
gragas
>As the world enters what could be the twilight of the oil age

This is the point when I stopped taking the article seriously.

