Earlier today I delivered the keynote address at the Uintah Basin Energy Summit in Vernal, Utah. The Uintah Basin is an oil-producing region predominantly in the eastern portion of Utah.
Like many other oil-producing states, Utah saw its oil production more than double from 2004 to 2014, before retreating in the face of the oil price crash. Utah oil producers, like oil producers everywhere, are intensely interested in what comes next in the oil industry.
The thrust of my talk was to argue that the oil age isn't in its death throes. My presentation examined the past dozen years of the oil cycle, with a focus on OPEC's role in first driving oil prices to $100 a barrel (bbl), and subsequently in helping drive prices below $30/bbl. An analogy I used was that U.S. shale producers "started the fire" by adding so much oil production to the market, and OPEC eventually "threw gasoline on it" when they increased production in 2014. The combination of the two actions crashed oil prices.
As I was preparing for my talk, I broke down oil demand growth in the past five years in various regions of the world. I chose the past five years, because those years have marked rapid growth in sales of electric vehicles (EVs). If the near-term peak oil demand hypothesis is true, you might expect to see a slowing of oil demand growth in regions with fast growth in EVs. (For more details on the peak oil demand hypothesis, see Peak Oil And Peak Demand Have Entirely Different Outcomes).
Here is what the past five years of oil demand growth have been like around the world:
Global oil demand during that time grew by 6.8 million barrels per day (BPD), with 69% of that growth taking place in the Asia Pacific region. Far behind in second place was the Middle East, which saw demand increase by one million BPD. Notably, oil demand growth accelerated relative to the previous five-year period of 2006-2011 in Asia Pacific, Africa, the U.S., and for the world as a whole.
The only notable exception, with a decline in oil demand, was the European Union (EU). In the past five years, oil demand in the EU fell by nearly 600,000 BPD. Oil demand fell in most European countries over the past five years, with some noteworthy exceptions. One was Norway, which despite being the world leader in growth and total market share for electric vehicles (EVs), saw its oil consumption grow by 1%. In comparison, oil demand in the EU fell by 4.1% during that time. (Note that Norway isn't in the EU, but it is surrounded by EU countries that saw oil demand decline during the past five years).
Oil demand in some other developing regions is growing as fast as it is in the Asia Pacific regi s, but from a lower demand level. Africa, for instance, saw its demand grow by 16% in the past five years, just short of Asia Pacific's leading 16.1% growth:
Global oil demand grew by 7.6% during the period.
My conclusion was that outside of the EU, there are no clear cut examples of declining oil demand in the past five years. To the contrary, oil demand continues to increase in most regions of the world, including those with high growth rates for electric vehicles.
