Consumption

For our first examination of the statistics of peak oil, we look at consumption which is one of the least controversial aspects. But with demand rising around the world, it is by no means insubstantial.

The BP Energy Review unhelpfully gives the values in thousand barrels daily. Converting to gigabarrels per year, this chart shows the world’s consumption of oil from 1965 to 2006.

C1. Oil Consumption (World)**

It is immediately noticeable that consumption rose steadily apart from two ‘blips’, in 1974 and 1980. These ‘oil shocks’ were due to political effects rather than peak oil and have important effects in many areas. It is important to be aware of what happened then.

The 1970s Oil Shocks

Extract from World Book encyclopedia

OPEC was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. At that time, the petroleum industry in these countries was controlled by United States and European oil companies. These firms paid the host governments income taxes and royalties based on the posted price the companies charged for crude oil on the world market. In 1959 and 1960, oil production greatly exceeded world demand. The surplus that was thereby created prompted several of the major companies to cut the posted price and thus their payments to host governments. OPEC was founded in response to this price cut.
OPEC had little influence on oil prices during the 1960s, when production expanded to keep pace with demand. In the 1970s, however, world demand for oil began to outgrow what was available from non-OPEC sources. In 1973, OPEC stopped consulting with oil companies and decided to raise oil prices in keeping with the rate of inflation.
Armed conflict also contributed to rising oil prices. During the Arab-Israeli War of 1973, some Arab members of OPEC stopped or reduced oil exports to countries supporting Israel. As a result, oil prices in those countries, including the United States and other Western industrial nations, rose sharply. During the late 1970s, the Iranian revolution caused a shortage that helped OPEC increase oil prices again.
OPEC was less successful at achieving its goals in the 1980s, when the world oil supply again exceeded demand. In 1983, OPEC cut the price of its oil for the first time. During the middle and late 1980s, OPEC set production limits for its members several times. But many members ignored the limits, thereby holding prices down. Although brief price increases resulted from Iraq's invasion of Kuwait in 1990, oil prices remained stable in the early 1990s.

The results of the oil shocks was worldwide double-figure inflation and a stagnant economy.

The charts below show how the sudden increases in oil prices in the 70s and 80s were reflected by unemployment, inflation and growth in the UK.

The results of the oil rises to come will be worse since there will be no hope of the resumption of cheap oil.

Future Consumption

The problems of oil consumption in the future revolve around two factors: population and the increasing use from developing countries. A chart of the US Census Bureau’s world population shows that population is expected to increase steadily over the first half of the this century. (What it doesn’t show is any drop in population that might be caused by oil decline – from wars, recessions, famine, etc).

More people means more demands for fuel, energy, plastics and food – all highly dependent on oil. In the ten years from 2002 to 2012, the world population is expected to rise from 6.23 billion to 6.96 billion, an extra 12% to be fed, supplied and energised. Along with population, the other factor is the increasing use of oil in developing countries – countries which, up to now, had been contributing little to consumption. Compare these charts of oil consumption from selected countries and regions.

The first two show the ‘developed’ countries/regions of USA, Europe, UK and South/Central America. Although the consumption is high (as far as the USA and Europe is concerned), the trend is either gentle or actually in reverse (note how the oil shocks of the 70s and 80s are reflected again). The percentage changes from 1965 to 2006 range from 20% for the UK, to 203% for South/Central America with Europe and USA sitting between (see Chart C10). This compares with overall world consumption which grew by 168%.

But when we look at the charts for Pacific Asia and China, we see a very different view. Chart C8 uses the same scale as Chart C6 and Chart C7, and you can see how the whole of Asia Pacific has already surpassed the levels of the USA and Europe and at a much steeper curve (a change since 1965 of 649%. China’s rise seems more gentle because of the scale: if you isolate China and bring the scale down to fit (Chart C9), the frightening rise in that country’s oil consumption is clear. The percentage change over the 40 years is a whopping 3328%.

Below (C10) is a chart of those percentage changes and it shows the dramatic difference between the developed and the developing world.

The clear omen from this is that oil consumption in Asia is going to increase dramatically in the next few decades and this will outweigh any decrease from Europe and the US. The population of China, even with birth control measures, is still expected to rise. This is the trend. In reality, consumption will slow and decline as oil production decreases and recessions bite, but the exact figures for that are impossible to calculate. What is clear is that, if the world continues as it presently is doing, oil consumption will continue to rise.