16 March 2010

Oil Demand in the Platinum Age

Two scholars at Leeds and NYU have placed online a very interesting draft analysis of projected demand for oil. The figure above comes from their analysis.
J. M. Dargay and D. Gately, 2010. World oil demand’s shift toward faster growing and less price-responsive products and regions (PDF)
Here is their provocative conclusion:
World oil consumption has experienced dramatic share changes since 1971, shifting toward faster growing and less price-responsive products and regions. The OECD and FSU consumed 86% of world oil in 1971, compared with only 61% today. OECD use of fuel oil was 33% of total world oil in 1973, compared with 9% today.

Most of the easy reductions in demand – fuel-switching away from residual and heating oil, especially in the OECD – has been accomplished: we have picked the low-hanging fruit. Demand for these fuel switchable oils has fallen by one-third, while the demand for transport and other oil has doubled. Hence, world oil demand is now dominated by transport and other oil, which are less price-responsive and more income-responsive than residual and heating oil. Similarly, the regional shift of world demand away from the OECD and FSU has the same effect – toward regions whose income growth and income-elasticities of demand are higher, and whose price-elasticities are lower, than for the OECD and FSU.

The rest of the world now consumes 39% of world oil (but it has nearly 80% of world population), and its income is growing faster than in the OECD and FSU. Its per-capita oil demand has grown from 0.4 liters/day in 1971 to 1.1 liters/day in 2008, averaging about 2.5% annually. DOE(2009) projects that the rest-of-world’s annual per-capita oil growth rate will slow dramatically (to 0.56% ), even assuming faster income growth than in 1971-2008, increasing only to 1.2 liters/day by 2030. IEA(2009) and OPEC(2009) make similar projections. In contrast, we project a rest-of-world growth rate similar to what has occurred historically, to 1.8 liters/day by 2030. This difference in projections amounts to an extra 20 mbd in rest-of-world demand by 2030 – roughly twice the current production of Saudi Arabia. Such rapid demand growth is unlikely to be supplied by conventional oil resources. Hence this imbalance would have to be rectified by some combination of higher real oil prices, much more rapid and aggressive penetration of alternative technologies for producing liquids, much tighter oil-saving policies and standards adopted by multiple countries, and slower world economic growth.
The analysis supports assertions by Garnaut et al. that the world has entered a "platinum age" of growth in emissions:
Rapid global economic growth, centred in Asia but now spread across the world, is driving rapid greenhouse-gas emissions growth, making earlier projections unrealistic. . . we project annual emissions by 2030 to be almost double current volumes, 11 per cent higher than in the most pessimistic scenario developed by the Intergovernmental Panel on Climate Change (IPCC), and at a level reached only in 2050 in the business-as-usual scenario used by the Stern Review. This has major implications for the global approach to climate-change mitigation. The required effort is much larger than implicit in the IPCC data informing the current international climate negotiations.
The analysis is also supportive of the suggestion in Pielke et al. 2008 (PDF) that the IPCC SRES scenarios had potentially underestimated future due to aggressive assumptions about rates of spontaneous decarbonization:
. . . it is likely that we have only just begun to experience the surge in global energy use associated with ongoing rapid development. Such trends are in stark contrast to the optimism of the near-future IPCC projections and seem unlikely to alter course soon. The world is on a development and energy path that will bring with it a surge in carbon-dioxide emissions — a surge that can only end with a transformation of global energy systems. We believe such technological transformation will take many decades to complete, even if we start taking far more aggressive action on energy technology innovation today.
These various analyses suggest that the challenge of mitigation -- that is, stabilizing carbon dioxide concentrations at a low level, such as 450 ppm -- that been dramatically underestimated. If so, then the policies currently being discussed are not up to the challenge. It is uncomfortable to discuss for those wanting action on climate change, no doubt. Maybe that is why there is so much renewed attention being paid to debates over the science.


  1. FSU= Former Soviet Union, OECD= ?

  2. -1-Andrew

    A group of 30 rich countries:


    AUSTRALIA: 7 June 1971
    AUSTRIA: 29 September 1961
    BELGIUM: 13 September 1961
    CANADA: 10 April 1961
    CZECH REPUBLIC: 21 December 1995
    DENMARK: 30 May 1961
    FINLAND: 28 January 1969
    FRANCE: 7 August 1961
    GERMANY: 27 September 1961
    GREECE: 27 September 1961
    HUNGARY: 7 May 1996
    ICELAND: 5 June 1961
    IRELAND: 17 August 1961
    ITALY: 29 March 1962
    JAPAN: 28 April 1964
    KOREA: 12 December 1996
    LUXEMBOURG: 7 December 1961
    MEXICO: 18 May 1994
    NETHERLANDS: 13 November 1961
    NEW ZEALAND: 29 May 1973
    NORWAY: 4 July 1961
    POLAND: 22 November 1996
    PORTUGAL: 4 August 1961
    SLOVAK REPUBLIC: 14 December 2000
    SPAIN: 3 August 1961
    SWEDEN: 28 September 1961
    SWITZERLAND: 28 September 1961
    TURKEY: 2 August 1961
    UNITED KINGDOM: 2 May 1961
    UNITED STATES: 12 April 1961

  3. "These various analyses suggest that the challenge of mitigation -- that is, stabilizing carbon dioxide concentrations at a low level, such as 450 ppm -- that been dramatically underestimated. "

    It has always been obvious to me that Kyoto was principally designed to accelerate globalisation and that the result would be more Co2 and pollution because India and China were exempt.

    In the 1990s, part of the anti globalisation debate was AGW. Now the movement has been subsumed by international finance's most profitable scam, and its leaders like George Monbiot and Naomi Klein have been bought.

    There is literally nothing that would persuade me that human Co2 (at any level) was dangerous to the climate in the circumstances of untold millions of dollars being thrown at propaganda.

  4. GHG emissions may be greater than expected:

    therefore mitigation will be harder than expected:

    therefore lets debate the science.

    I follow the first therefore, but the second one loses me.

    Wouldn't the logical response be:
    a) try harder to mitigate emissions
    b) prepare to adapt to committed changes

  5. So basically they have put a new label on the old first, second, and third worlds, moved some second world countries to third (Cuba, North Korea) and some third to first, and slapped some new labels on. I see.

    Just for clarification, Korea is South Korea, right? Because their economy is VERY different of course! North Korea being the most state controlled in the world just after Zimbabwe.

  6. "In contrast, we project a rest-of-world growth rate similar to what has occurred historically, to 1.8 liters/day by 2030."

    Population Density in NYC is 2,000/km2. Parking is a nightmare. Residents of NYC have the lowest gasoline consumption per capita in the US I believe.

    NYC doesn't even make the top 100 of most densely populated cities of the world.

    Car sales are skyrocketing in China, gasoline consumption isn't.

    The American dream of a 3,000 sq ft house on an acre lot just isn't possible in most of the world.

    The population density in China is 4 times the population density of the US. The population density in India is 10 times the density of the US.

    It's more probable that Chinese and Indian automobile usage will mimic NYC rather then Kansas City.

  7. If the 'science' had been properly debated in the first place, then we wouldn't have 'emission impossible'CO2 targets.

    The bottom line is that climate remains with the bounds of natural variability, despite man-made CO2 emissions. Then we could get on with the task of developing viable, affordable alternatives to carbon fuels at a pace dictated by the pace of technological development, rather than wasting $billions/trillions on arbitrary dates and targets that we have no hope of meeting.

  8. the future supply side makes those demand projections problematic

    if production cannot be increased significantly which is a distinct possibility combined with the land export model what the OECD nations are facing will likely do them in economically

    Trying to replace your primary source of energy while facing a permanent and progressive decrease in the availability of that primary energy source has some serious and profound consequences. This has to be taken into consideration as it affects everything.

  9. "It's more probable that Chinese and Indian automobile usage will mimic NYC rather then Kansas City."

    stop and think. China and India are going from no automobiles to automobiles in a population of one billion each. New York vs Kansas City is irrelevant. If five hundred million people drive around the block, the CO2 will be counted in kilotons.

  10. -1- Andrew, thanks for asking.

    -2- Roger, thanks for answering, it saves time looking it up on the 'net.

  11. Harrywr2-
    China's oil consumption has roughly quadrupled since 1990, with the bulk of the increase coming from imports. Given that oil is used almost entirely as a transportation fuel, your projection of China as becoming a giant NYC seems over-optimistic.

  12. Infinite growth in a finite system is impossible. When will oil production become unable to keep up with demand? What if Hubbert's Peak is reached?

    Only economists can write entire reports and articles on the assumption that growth is infinite. It never ceases to amaze me.

    BAU is an impossibility, and not just because of AGW. There are other symptoms of the pathological disorder of 'growth is infinite' that will keep increasing the stress on the system. Under BAU collapse is inevitable. The only question is when, and economists for sure are not going to give the answer. They won't even try.

  13. TSL,

    There were more then 10 million cars sold last year in China, more then the US. That's like a 20% increase in total number of cars.

    Gasoline sales don't reflect the car sales.

    There are a couple of theories.

    China is overstating automobile production,

    the Chinese government has a secret parking lot where they are parking millions of cars that were manufactured but remain unsold.

    The Chinese public are buying cars as a status symbol and parking them in their driveways.

    My former in-laws live in Taipei. They are quite affluent. They own their own home, a couple of apartments out etc etc. They also have whatever is the most expensive Volvo made. They might go somewhere in the Volvo once or twice a month.

    When I lived in London I owned a car, I drove it maybe 2,000 miles in a whole year.

    When I lived in Japan I skipped owning a car, and rented my parking space out for $1,000 a month. The car in that parking space might have moved 3 or 4 times a month. I never once felt inconvenienced by the fact I didn't own a car.

    I now live in a suburb of Seattle, the population density is insufficient to support good public transportation. Owning a car isn't a frivolous luxury.

  14. It is interesting to see the relationship between per capita emissions (hydrocarbon usage) and GDP. I made a brief UK centric study and found that the UK is 38th in emissions ranking. Furthermore, in terms of GDP to per capita emissions ratio, the UK does pretty well. The piece also considers the effect of different emissions cuts on the UK standing.


  15. People get too hung up on oil. Give me carbon and I'll give you liquid fuel. Peak oil is totally bogus.


    not with a seriously positive EROI we enjoy from oil you won't and this is everything, it literally is the leverage that allows us to do what we do in our lives

    Peak oil is impossible not to be true actually, unless of course it is going to miraculously start replacing itself to the tune of 75 million barrels per day. All mined resources have the same basic production curves and traits and this includes oil.

  17. @carl
    unless of course it is going to miraculously start replacing itself
    There is more than a theory for that:



  18. Exactly, carl, EROEI is the key to everything.

  19. Jonathan Drake (#14)

    Unfortunately your analysis of emissions/GDP ratios is flawed because you have followed the IPCC's erroneous practice of converting the GDPs of different countries into a common unit using market exchange rates. The correct procedure, as pointed out by Richard Tol in a recent guest post on this blog, is to use purchasing power parities (PPPs) for this purpose.

    PPP-based comparisons of per capita GDP are readily available on the same IMF World Economic Outlook April 2009 database from which you have taken the MER-based figures plotted on your graph. These show, for example, that the per capita GDP(PPP) levels of Australia, Austria, Denmark, Finland, Iceland, Ireland, Netherlands, Sweden and Switzerland were all LOWER than those of the US in 2006 (the year plotted on your graph). The per capita GDP levels of all of these countries are shown as HIGHER than the US on your graph, but this merely reflects the strength of these countries' currencies vis-a-vis the $US in 2006 - not their relative real (PPP-based) output levels which are the relevant measure to use when comparing emissions intensities.

  20. Carl 16
    $80/bbl oil is good enough for standard oil industry ROI using nat. gas as the feed. It's probably enough for coal too. That's enough for 100 years plus. By then we will be using something other than carbon. BTW nuclear is inexhaustible using breeder reactors and reprocessing.

  21. Ian Castles (#19)

    Thank you for pointing that out. As I'm sure you realised it was for illustrative purposes only, not as a definitive study. I merely used the data as obtained from the sources and worked the analyses from them.

    In hindsight, I agree that GDP(PPP) would have probably been better.

  22. @20

    you will run out of time

    sit down and even optimistically look at what it would take to replace our current energy usage with nuclear vs the actual decline rate of oil and coal from depletion and you lose and it isn't even friggin close !!

    realistically its even farther apart

    furthermore nuclear has such a low EROI you can't replace even current consumption of energy in the US period, it isn't practical cause you couldn't build enough nuke plants to do it

    bottom line: per capita consumption is going to drop and drop considerably and if you factor in the actual economic factors we face as a nation people had better start worrying about things like food and water as energy may indeed become a luxury any wish they had LOL


    100+ years of drilling and oil field history along with the samples from wells seriously disagrees, but hey go ahead and invest some money in that ostrich farm if you wish

    for those nuke advocates out there here's some reality for you:

    current production of pressure reactor vessels which are made of 200-400 ton steel castings is about 4 per year........

    insurance for nuke plants is always govt subsidized at well under 10% of potential damage costs cause the free market private sector won't touch it at ANY cost

    about 1/4 of US nuke plants are now leaking radioactive crap into our groundwater

    the US nuke industry is a case study in failed dreams and example of what NOT to do....you want more of this?

    even wind power has a higher EROI

  23. "sit down and even optimistically look at what it would take to replace our current energy usage with nuclear vs the actual decline rate of oil and coal from depletion and you lose and it isn't even friggin close !!"

    The U.S. could probably all electrical energy with nuclear energy inside of 20 years, if nuclear energy were cheap enough, and if their were no political obstacles to construction.

    For example, *if* a 1000 MW nuclear plant could be built for under $1 billion, and with the current nuclear operating costs, and with no political delays to construction, there would probably be a nuclear plant per week being built within 5-10 years.

    P.S. Of course, a 1000 MW nuclear power plant CAN'T presently be built for under $1 billion, and there are lengthy delays due to political opposition to any nuclear power project.

  24. @#23

    actually you have multiple logistical issues too

    like I posted before the world produces 3-4 pressure vessel castings per year and they are booked up years in advance

    it's a specialty item, there aren't many foundries that can make 200-400 ton steel castings.......US, Russia, Japan are about it

    not easy to ship either, then you have to have ample water sources and locations to put these things, they aren't just "plug and play"

    you think 1 a week can be done? ya right, good luck with that, talk about optimism you are so far out there its beyond ludicrous

    you'd need to build 200 of them to replace the 1400+ coal boilers and coal power in the US

    wanna replace all fossil fuel energy usage with nuke power and you would have to build about 27 petawatts worth or 2000+ nuke plants

    Typical nuke plant these days takes years, always over budget, always with massive problems and no it isn't political at all, fact is the nuke industry sucks at its job as it has shown repeatedly for decades. They are massive projects and quite complicated. With all the external costs their EROI is lousy too and that too has to be factored in. You will lose massive amounts of leverage in the switch which will bring some damn ugly economic consequences. Going from 40:1 down to well under 10:1 has consequences.

  25. "like I posted before the world produces 3-4 pressure vessel castings per year and they are booked up years in advance"

    That's simply because nuclear power is no where near a construction cost of $1000 per installed kilowatt (i.e., a 1000 MW plant for $1 billion).

    If nuclear power construction costs were that low, even building a new nuclear plant would be less expensive than running a fully depreciated coal-fired power plant...and there would be a tremendous financial incentive to build nuclear power plants to replace both coal- and natural-gas-fired power plants.

    "you think 1 a week can be done? ya right, good luck with that, talk about optimism you are so far out there its beyond ludicrous"

    One a week at $1 billion a pop is $50 billion a year. Do you know what's the annual capital spending by electric utilities in the United States?

  26. "Going from 40:1 down to well under 10:1 has consequences."

    What's "40:1"? Are you saying a modern coal-fired electrical power plant has an EROI of 40:1?