Far too little attention is paid to the demand side of all energy markets. For sure, production has sizzle, but consumption is king. No demand means no production.
And so I was delighted to read Floyd Norris' must read piece in the NYT that does a great job of collecting in one piece many of the most important facts about the demand side of the global oil market.
www.nytimes.com/2012/11/24/business/economy/oil-supply-is-rising-but-demand-keeps-pace-and-then-some.html?_r=0.
I will pull out from Norris' piece just one fact, among many important ones, to highlight here.
The IEA in its 2012 World Energy Outlook projects that US oil consumption will decline by one-third by 2035. Or to put it another way, US oil consumption will decline on average by about 1% per year for the next 23 years. That is an astonishing fact.
Reducing US oil consumption and surging domestic oil consumption are putting the US on a path toward becoming oil independent and even a net exporter. Indeed, falling consumption and rising production are both equally strong factors in ending the decades of the US importing foreign oil.
But the only way for the USA to free itself from the global pricing of oil and oil price shocks to our economy is to use less oil. And so the reduction in US oil consumption is especially important and great news indeed!
John
ReplyDeleteThere is a very big distinction between fact and prediction. Any IEA prediction about price and/or consumption should be taken with a giant grain of salt. Oil companies can tell you, no one has ever accurately predicted price, (and I am referring to your use of the word fact on the IEA price forecast for natural gas for 2013). Consumption is a little easier, but still dicey. But it is still a prediction, NOT a fact.
Good luck on your run for office.
Larry
I agree with Larry. These things can be really far off the mark. I don't doubt that our consumption will decline however. Increased efficiency, a shift to natural gas and electric vehicles, hopefully a shift from oil heat to gas heat should all lead to a decrease in consumption per capita. A lot of it depends on how fast the population grows.
DeleteI accept your basic point. Of course, it is a fact that the IEA has made the forecast. But as you point out energy forecasts in particular are more often wrong than right.
DeleteIn this case, I would suggest that the IEA forecast may err by forecasting too high US oil consumption. My own view is that oil substitutes will grow rapidly.