Oil demand around the world: suppression or destruction?
2 Dec, 2008 09:43 pm
The sky rocketing price of oil in 2007 and first half 2008 strained demand and led experts to question the established trends. As prices went up, demand seemed to have slowed. But is this just a temporary adjustment, are people simply cutting back on vehicle use for a few months? Or is it a structural change, a change in lifestyle? In other words are we looking at demand suppression or demand destruction? The debate started.
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David Fyfe, head of the Oil Market Division at the International Energy Agency (IEA) says demand is not actually shrinking, it has simply stopped growing. Economic recession combined with high oil prices have slowed it down.
Andrew Sutton, a private consultancy and oil market expert, warns about the dangers of taking long term decisions based on the perception of a substantial reduction in demand that may prove less significant than expected. He draws our attention to the developing world, and especially to the BRIC (Brazil, Russia, India and China) economies to identify future trends. (To be published tomorrow)
To better understand what is happening in the Chinese market, Paul Ting, who specialises in the Chinese oil market, explains the demand trend in the Asian giant. (To be published Thursday)
And what can producers do to stabilize demand? That is what Scitizen asked Ali Hussein, oil consultant and former OPEC officer, who explained the possibilities open to OPEC to affect the market. He believes price has little to do with demand when it comes to strategic commodities such as oil. (To be published Friday).
So take a close look at the opinions of four leading oil experts in this Scitizen special dossier on oil demand prospects
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Either way, a fall in growth implies an economic downturn and along with the credit-crunch and fear by the banks to lend money to development projects, the immediate likelihood of economic restoration does seem infeasible.
It is interesting that many analysts are talking about "brighter times" from say mid-2010 to 2011, which many oil analysts reckon to be the point of arrival of peak oil. Now the real problem is a gap between supply and demand for oil, and it seems that potentially the peak or the gap will bite hard on the tail of the credit crunch and current recession.
Thus it is anybody's guess when we will (if we will) pull out of a fiscal nose-dive. One alternative scenario is the kind of Long Emergency that James Kustler has written about, where depleting supplies of cheap oil cause a relocalisation of society into less transport intensive (small) communities at best; or at worst anarchy prevails.
In this scenario the stock markets are anticipated to oscillate in perpetuity. I wonder of we are witnessing the dawn of such a time?
Chris Rhodes.