"Peak Oil Demand" is still just a position in the Peak Oil Debate


I last discussed "Peak Oil Demand" in a post a few months back concerning Citi's report "Global Oil Demand Growth - The End is Nigh" And it's worth referring back to that post again since Peak Oil Demand is back in the news with a new study out of Stanford: "Peak Oil Demand: The role of efficiency and alternative fuels in a global oil production decline"

And with the study comes a new call that concerns about Peak Oil should ease... why... because Stanford researchers said so, of course.

As I mentioned last time, Peak Oil Demand isn't some magic checkmate move to end Peak Oil, it's just a position by individual analysts and "their version of how they see things playing out... In their view, they see natural gas and other technologies coming online very quickly, this will allow substitution from oil in a manner and scale that hasn't previously been available. So while the story has been that oil demand will continue to increase after supply has peaked...[they're] suggesting that the substitution will occur so quickly that the demand of oil will peak before we reach supply constraints."

But a lot of things have to go right for the peak oil demand predictions to pan out. The Financial Times' Javier Blas had a quote for the Citi report that still accurately applies here:

"Peak oil demand is a provocative theory and would rely on some unanswered questions being met: namely on the development of large-scale gas-fired trucks, rail and shipping vessels; the sustainability of the US shale boom; and policy action to support improved fuel-mileage and to phase out oil subsidies."

Andrew Revkin covered the Stanford study in his New York Times blog and he received a response letter from Robert Hirsch (of the "Hirsch report" fame). Hirsch wrote to Revkin:

"As I've said in the past, "peak oil" is a "rates race." The rate of change of demand will have its ups and downs, but is unlikely to dramatically decline. When world oil production begins to decline, its rate of decline will likely be in the 3-5% per year range, which is much faster than demand decline.
We are sticking with our 3 years ago estimate of the onset of decline in 2-5 years."

The point here is that if you simply hear about a study and immediately conclude that Peak Oil isn't important anymore, you're doing it wrong. That's the same as hearing a prediction of doom and concluding that Peak Oil is the end of the world. One needs to do a risk analysis with ALL sources and evidence in mind.

If someone came up to you and told you that your house is NEVER going to burn down and that home insurance is a scam, would you believe them? Your house may in fact never burn down, but you probably still have insurance. You don't have insurance because you actually believe your house will catch fire someday, but because in your own risk analysis you determined that if your house ever did burn, even though the probability is small, the results are so catastrophic that's it's worth it to take a few prudent steps to protect yourself and your family against that scenario.

That level of nuance is often lost in energy debates. Keep in mind, I'm not saying that the Stanford researchers are wrong, I don't know that, no one can predict the future. But I am saying that it's wrong for society to assume it doesn't need "energy insurance" out of the idea that "nothing bad will ever happen."

At the end of the NYT piece, Revkin wisely ended by linking to an article by ASPO-USA Board Member Kurt Cobb that highlights the terrible track record of energy forecasts. Never forget - most turn out very wrong.