The Oil Price Collapse: The Need for a New Roadmap - Part 1, Resources Economics
posted by Albert Bressand on January 17, 2015 - 10:38am
Reserves must be seen as a co-production of nature and man-made technology. Except for wood and dung that pre-industrial populations could burn on the spot, there is no such thing as a ‘natural resource’. Our advanced energy system is fueled by a combination of stuff-in-place and human skills. Terms like ‘gas to Liquids’ (GTL) or ‘cracking’ capture the manufacturing element; the evolution underway will not stop there—to the point possibly of ‘oil’ being someday manufactured from CO2 and water. As John and Beth Mitchell and Valerie Marcel and put it in their report for Chatham House in London: “The foreseeable problem is not finite resources but the rate at which these very large resources can be converted into reserves for potential production. Reserves of oil and gas have each more than doubled since 1980–faster than the increase in production. Technologies are developing which are creating new reserves of ‘unconventional’ oil, as they already have for gas.”
Interestingly, the IEA’s World Energy Outlook 2014 foresees oil demand peaking before supply stops to grow. In other words, peak demand rather than peak supply will define the mid-century oil market dynamics. In 30 years’ time, given some stability in the Middle East, a global demand peak will be reached without ‘peak oil’ or punishing prices being the constraining force. Already a peak in the world’s gasoline demand at 23.5 mb/d is foreseen for early 2030s and a ‘peak car’ trend is detectable in advanced countries where the latest iPod rather than the fastest, largest car now tend to define social status for younger generations. In the same vein, one may observe that between 2005-2013, despite a 6.9% growth in U.S. population and a 10.4% real output increase, US domestic consumption of finished oil products fell by almost 12% (2.2 mb/d).
To download the first installment of my three-part report on oil price collapse, please click here.