Modern economics is a matter of supply and demand. And when it comes to ‘peak oil’, it’s the difference between catastrophe and opportunity.
Since the early 20th Century, scientists, experts, and economists have been predicting the manifestation of ‘peak oil’. For years, many people viewed ‘peak oil’ as a herald of global catastrophe, and the end of major economies.
However, in recent years, the supply and demand situation for oil has turned in favour of supply. It now appears that peak oil demand is what organisations and countries need to be aware of.
What’s more, some experts are predicting that this demand will happen sooner than expected. And global oil and gas organisations need to consider their next move in order to stay competitive.
What Do We Mean By ‘Peak Oil’?
‘Peak Oil‘ describes a situation where global oil production hits its peak, then is in perpetual decline. The first prediction of this was in 1919, and an expectation that peak would be reached by the mid-1920s.
Throughout the last century, a number of geoscientists have continued to make predictions. And these predictions have all been proved to be wrong. However, some experts believe this peak may already have happened without anyone really noticing.
Studies have shown that in North America, the volume of oil discovered has dropped consistently since the 1930s. In addition, production of oil in the region has dropped year on year since the 1970s. That’s not to say that overall fossil fuel production has dropped – we’ll come to that shortly.
What people have agreed upon is that the concerns over ‘peak oil’ have abated, or disappeared entirely. The expected global economic collapse is unlikely to take place (or at least be a result of running out of oil).
Supply Outstripping Demand
So what has changed? Well, there are three reasons that keep appearing in a lot of the articles written about ‘peak oil’. They are:
- A huge increase in the volume of shale oil being produced. The oil is produced differently, but can be a direct substitute for crude oil.
- The US-Iran deal signed in 2015 has lifted sanctions on the oil-rich Middle-Eastern country.
- OPEC, which accounts for 43 per cent of global oil production, has, until recently, refused to cut supply. This surplus of supply was the reason the price of a barrel of oil dropped dramatically earlier this year.
This has shifted the thinking on a surplus of demand for crude oil, to a surplus of global supply. Or from ‘peak oil’ to peak oil demand.
Simon Henry, the Chief Financial Officer at Royal Dutch Shell, has predicted that this could happen in as little as five years. Henry stated that, “peak may be somewhere between 5 and 15 years hence…driven by efficiency and substitution.”
This view is at odds with many of the other major global oil producers, however. Exxon Mobil is anticipating a 20 per cent rise to 2040, while Saudi Arabia, the world’s largest crude oil producer, has argued that demand will rise on the back of increased consumption in emerging markets.
But, as some experts point out, even these predictions are built of shifting sands. The global trade slowdown, combined with the events of 2016, could adversely impact demand in developing countries.
Consumers & Organisations Shifting Focus
Whether it’s five years, or fifty years, what is clear is that oil is still a finite resource. Production will eventually diminish, and consumer requirements will change alongside this. This is where the global opportunities come in, but only for organisations willing to keep pace with change.
Public interest in renewable energy is increasing rapidly, and consumer buying habits are changing too. Even industries traditionally driving oil consumption, like the automotive industry, are seeing massive change.
In the UK alone, sales of electric cars have increased by 48 per cent in the past year. Sales of hybrid cars during the same period have increased a whopping 133 per cent. There are large solar panel fields being built around the world, and Ikea is even selling them to consumers in the UK.
Shell and BP are just two of the organisations expanding their portfolios into renewable energy sources, such as biofuels and natural gas. Greater investment in the renewables industry by major organisations has also helped to reduce costs associated with it. And as costs fall, demand from organisations and individuals will inevitably rise.
It would be foolish to make predications given how difficult it is to predict correctly about oil and energy. It’s a topic that is unlikely to go away any time soon, and one that organisations and wider supply chains need to be keeping up to date with.
Do you have a view on ‘peak oil demand’? Do you think it’s time to focus more on renewable energies? Let us know what you think in the comments below.
Like a treat behind each door of your advent calendar, we’ve found the tastiest procurement headlines this week.
Robotic Exoskeleton Gives Workers Super-Strength
- SuitX, a Californian robotics company, has unveiled a new Modular Agile Exoskeleton for manual workers.
- The suit is expected to greatly improve worker productivity and limit exposure to long-term health risks such as back injuries.
- The exoskeleton is comprised of three modules – backX, shoulderX, and legX – which can be worn separately or as a single system.
- The exoskeleton supports the body, reducing the amount of effort required to perform tasks such as lifting heavy weights.
Watch the video on THOMASNET
U.S. CEOs Face Consumer Backlash over Trump Victory Response
- US Corporate CEOs have not hesitated to make their political views known in light of Donald Trump’s election victory.
- Responses have ranged from congratulatory, to calls for unity, and commitments to company diversity policies.
- Statements in support or against President-elect Trump have put brands at risk of consumer backlash.
- Some CEOs who have spoken out have seen calls for boycotts of their brands on social media. Other CEOs have experienced backlash from their own employees on the other side of the political spectrum.
Read more at the Washington Post
Bank of England Seeking £5 Note Solutions
- The supplier for the new £5 is looking for solutions to the make-up of the note’s base polymer following a backlash this week.
- It was revealed that the note’s polymer contains animal fat in the form of beef tallow.
- A petition on behalf of groups including vegetarians, vegans, and religious groups garnered more than 100,000 signatures in two days.
- The Bank of England has said that their supplier, Innovia, is working with its supply chain to come up with a resolution.
Read more on Supply Management
Maersk Line Acquires Hamburg Sud
- A.P. Moller-Maersk has agreed a deal to acquire German shipping line Hamburg Sud from the Oetker Group.
- It’s estimated that the deal is worth over $4 billion, after Maersk won out in the bidding process.
- The deal brings Maersk’s share of the global container market to 18 per cent, and it hopes to use the deal to return to profitability.
- It’s the latest in a long line of mergers and acquisitions in the shipping industry, thanks to a huge downturn in 2016.
Read more on Supply Chain Dive