Discussions about “peak oil” long ago shifted from when crude oil supply might reach its apex to when oil demand will peak and start to decline as the world becomes ever more energy-efficient and shifts to lower-carbon sources of energy. The date at which oil demand will stop growing is highly uncertain, and small changes in assumptions can lead to vastly different estimates. Also, there is little reason to believe that once oil demand peaks it will fall sharply — the world is likely to demand large quantities of oil for many decades to come. More importantly, the shift in paradigm from an age of perceived oil scarcity to an age of oil abundance poses major challenges for oil-producing countries as they try both to ensure that their oil is produced and consumed, and at the same time diversify their economies to prepare for a time when they can no longer rely on oil to provide their main source of revenue. Today, the Oxford Institute for Energy Studies and BP Group Chief Economist Spencer Dale summarize their recent report on future trends in oil supply, demand and prices.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
The rise of electric vehicles and the growing pressures to decarbonize the transportation sector means that oil is facing major competition for the first time within its core source of demand. This has led to considerable focus within the industry and among commentators on the prospects for peak oil demand — the recognition that the combined forces of improving energy-efficiency and building pressure to reduce carbon emissions and improve urban air quality is likely to cause oil demand to stop increasing after over 150 years of almost uninterrupted growth. At the same time, the supply side of the oil market is experiencing its own revolution. The advent of U.S. tight oil has fundamentally altered the behavior of oil markets, introducing a new and flexible source of competitive oil. More generally, the application of new technologies has the potential to unlock huge new reserves of oil over the next 20 to 30 years.
The concept of peak oil demand, combined with increasingly plentiful supplies of oil, has led many to conclude that oil prices are likely to decline inexorably over time. Proponents posit that if the demand for oil is drying up and the world is awash with oil, why should oil prices be significantly higher than the cost of extracting the marginal barrel?
Our view is that growth in oil demand is likely to slow gradually and eventually peak, and that plentiful supplies of oil are likely to fundamentally alter the behavior of oil producing economies. However, we also argue in our new report that the current focus on the changing nature of the oil market is largely misplaced. Much of the popular debate is centered around when oil demand is likely to peak. Will it be 2025, 2035, 2040? (Figure 1 shows a few scenarios from recent analyses.)
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About the song
“Changes” is one of the best-known songs by Britain’s own David Bowie and is ranked #128 on Rolling Stone magazine’s list of “The 500 Greatest Songs of All Time.” “Changes” was a track on Bowie’s fourth studio album, Hunky Dory, which was released in late 1971. Hunky Dory was produced by Ken Scott and Bowie and is the first album to feature players that would end up being the legendary Spiders from Mars band that recorded Bowie’s next LP, The Rise and Fall of Ziggy Stardust and the Spiders from Mars.
The “Changes” track features Bowie on vocals and saxophone, future Yes band member Rick Wakeman on keyboards, and string arrangements by guitarist Mick Ronson. The song is an autobiographical tale describing Bowie-s often chameleon-like career, with its many changes of direction in style and substance. Ironically, the song never cracked the U.S. Top 40 upon its release in January 1972, topping out at #66. Later, the song became an iconic Bowie tune — always a crowd favorite at live concerts, and featured in movies and TV shows.
David Bowie (David Robert Jones) was an English singer, songwriter, musician and actor. He is considered an iconic figure in popular music in the 20th century. Raised in London, he got his professional start in his teens with the King Bees, who released one single, “Liza Jane,” in 1964. He signed with Mercury Records in 1969 and released “Space Oddity,” which became a top-five hit in the UK. He has released 27 studio albums, 27 compilation albums, 22 live albums, eight EPs, three soundtrack albums and 128 singles. He has sold more than 100 million records worldwide. He won six Grammy Awards, four Brit Awards, an Ivor Novello Award and a Saturn Award, and is a member of the Rock and Roll Hall of Fame and the Songwriters Hall of Fame. He starred in seven motion pictures and had a featured role in two others. Bowie died in New York City in January 2016 at the age of 69.
