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Will Peak Oil Come Anytime Soon?

Our taste change, technologies evolve, live goes on and whether we like it or not, the world changes every day. To put it bluntly, change is inevitable. Although it’s an inevitable reality of our world, it doesn’t mean that we’re on the verge of it. On January 24, 2018, British Petroleum (BP) held its annual Energy Outlook forum. At this discussion, BP tells its investors and other interested parties its short and long term predictions for the petroleum industry. Far from the bearish outlook on the petroleum market held by some observers, British Petroleum was considerably bullish in its outlook. In their report, the company concluded that oil demand will continue growing into the 2050’s due to projected growth in the plastic goods market. Similar to BP’s position, Organization of Petroleum Exporting Countries (OPEC) announced in November 2017 that, despite a global shift to cleaner energy sources by developed countries, oil demand will continue to rise for at least the next five years . Even the United States, due to recent deregulation and rise in investment, is projected to break records by becoming the world’s largest oil producer.

In September 2017, Saudi Arabia finally allowed its female citizens to drive vehicles. While driving is simply a part and parcel of life for most adult women in the United States, this move was certainly a major step towards equality in Saudi Arabia. But, as many have correctly pointed out, this was not just a move by the relatively liberal Prince Mohammed bin Salman to extend rights to half of his subjects. Instead, it was a strategic decision to help diversify the kingdom’s economy in an age of uncertainty over the efficacy of oil. This is a true statement by all accounts, as Saudi Arabia has been far too reliant on its primary export for revenue.

Many point to Saudi Arabia's economic reform as a tell tale sign of a coming abrupt and sharp decline in global usage. Unfortunately for them, a drastic change of this magnitude in the span of a few years is a pipe dream. The developed and industrialized world is still very much reliant on oil for almost all facets of modern life. Total energy usage in the United States, while comparatively cleaner than previous decades, is still projected to grow by 5% by 2040. The plastics industry is predicted to grow substantially, as it has the potential to reach a USD value of $654.3 billion by 2020. This growth in plastics is similarly represented globally as well, giving the petroleum industry a much needed breath of fresh air.

But the overall growth is not just represented by the progress in the plastics industry. We have been hitting all time highs in gasoline consumption. But how can that be if we’re also hitting records in the number of electric vehicles hitting the roads? The answer is more straightforward  than you think: there are more cars on the road now than ever before. Far from sensationalist headlines proclaiming that the end of gasoline engine cars is nigh, there are simply more cars around - both electric and combustion. Driving cars that utilize gasoline as their energy source is still more reliable and oftentimes cheaper than currently available electric cars.

Much of this may come as a great disappointment to those who wish to have a cleaner Earth. And to be frank, this certainly goes against the current zeitgeist of ridding our societies of fossil fuels. Maybe in the future more of us will be driving electric cars on energy not derived from petroleum, but as of 2018, this dream is unrealistic. And while we ourselves in the developed world should strive for the use of cleaner energies, the use of petroleum has proven to be imperative to the growth developing economies.

In 2013, the demand for oil in the developing world surpassed that of the wealthiest nations on Earth. At that point, exports of crude oil from West African countries were beginning to skyrocket. By and large, their oil has been shipped to newly industrialized economies, such as India, China, Brazil, Indonesia, and a handful of other countries. This oil has not only fueled the economic growth of the latter countries, but also to the even less developed economies. For many countries, the use of cheap fossil fuels has decreased levels of poverty’ and while many developing countries still face social and economic obstacles, the increasing use of oil is a sign of economic growth. Angola, one of Africa’s key exporters of oil, has seen its GDP rise from 9.1 billion USD in 2000 to 89.6 billion USD in 2016. Nigeria has fared even better than Angola, seeing its GDP rise from 46.4 billion USD in 2000 to 405.1 billion USD in 2016. In the near future, economic activity in these countries will stimulate industrialization and we can expect other developing countries to follow suit.

An oilless world isn’t unattainable, but it just won’t come around as fast as some may think. It’s a gradual process, and renewable energy will inevitably catch up in terms of cost-effectiveness. Peak oil demand hasn’t hit us, nor will it in the immediate future. For now, oil is here to stay.

 

Sources:

“0383(2017).pdf.” U.S. Energy Information Administration. Accessed January 27, 2018. https://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf.

“Angola GDP | 1985-2018 | Data | Chart | Calendar | Forecast | News.” Accessed January 27, 2018. https://tradingeconomics.com/angola/gdp.

“Developing Country.” Wikipedia, January 23, 2018. https://en.wikipedia.org/w/index.php?title=Developing_country&oldid=821870456.

“Developing World Oil Demand Surpasses Wealthy Nations: EIA.” Reuters, June 11, 2013. https://www.reuters.com/article/us-eia-stea-nonoecd/developing-world-oil-demand-surpasses-wealthy-nations-eia-idUSBRE95A16120130611.

Inc, Grand View Research. “Plastics Market Worth $654.38 Billion By 2020: Grand View Research, Inc.” Accessed January 27, 2018. https://www.prnewswire.com/news-releases/plastics-market-worth-65438-billion-by-2020-grand-view-research-inc-511720541.html.

Lambert, Fred. “Electric Car Sales Reach 40% Growth in the US and It’s about to Blow up.” Electrek (blog), July 21, 2017. https://electrek.co/2017/07/21/electric-car-sales-us/.

Rapier, Robert. “Peak Demand? No, A New Gasoline Demand Record.” Forbes. Accessed January 27, 2018. https://www.forbes.com/sites/rrapier/2017/08/07/peak-demand-no-a-new-gasoline-demand-record/.

Raval, Anjli. “Opec Raises Oil Demand Outlook despite Clean Energy Push.” Financial Times, November 7, 2017. https://www.ft.com/content/b3ed98ff-f29d-3aee-ade3-8236732bc0ce.

“Saudi Arabia Agrees to Let Women Drive - The New York Times.” Accessed January 27, 2018. https://www.nytimes.com/2017/09/26/world/middleeast/saudi-arabia-women-drive.html.

“The World Needs Energy.” Canadian Association of Petroleum Producers. Accessed January 27, 2018. https://www.capp.ca:443/canadian-oil-and-natural-gas/the-world-needs-energy.

“U.S. Could Become World’s Largest Oil Producer This Year | Fortune.” Accessed January 27, 2018. http://fortune.com/2018/01/19/us-saudi-arabia-russia-largest-oil-producer-2018/.

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