WEBVTT - Peak oil is here. Well, maybe. 0:00:00.680 --> 0:00:06.399 Welcome to zero. I'm Akshatrati. This week peaks Politics and Predictions. 0:00:19.400 --> 0:00:22.079 Today we are going to talk about oil. Whether you 0:00:22.160 --> 0:00:25.680 love it or hate it, you cannot deny that the 0:00:25.720 --> 0:00:29.040 world needs it, at least right now. And if you 0:00:29.080 --> 0:00:31.760 care about tackling climate change, then you also need to 0:00:31.800 --> 0:00:34.680 care about what happens to the demand for oil over 0:00:34.720 --> 0:00:38.040 the coming decades. Growth in oil demand has so far 0:00:38.200 --> 0:00:41.600 been a close proxy for economic growth. While it's clear 0:00:41.680 --> 0:00:44.720 some of that economic growth and the energy that powered 0:00:44.760 --> 0:00:47.920 it has been responsible for climate change, it has also 0:00:47.960 --> 0:00:51.519 pulled hundreds of millions of people out of poverty. As 0:00:51.560 --> 0:00:54.160 we transition to clean energy, there is now a real 0:00:54.240 --> 0:00:56.520 prospect of breaking that linkage. 0:00:57.240 --> 0:01:00.320 If you're talking about structural decline in oil demand. Until 0:01:00.440 --> 0:01:03.440 very recently you were talking about structural decline in the 0:01:03.480 --> 0:01:06.039 global economy. I don't think we are talking about that 0:01:06.160 --> 0:01:09.520 now because we do have these quite effective substitutes, and 0:01:09.520 --> 0:01:11.320 they're becoming more effective by the year. 0:01:11.760 --> 0:01:14.800 That's David Fickling, a columnist for Bloomberg Opinion and my 0:01:14.920 --> 0:01:18.520 guest today. He's joining me to talk about peak oil. 0:01:19.400 --> 0:01:21.600 In a matter of mere decades, the world has gone 0:01:21.680 --> 0:01:24.679 from the specter of running out of oil to soon 0:01:24.760 --> 0:01:28.280 being able to choose not to extract every last job, 0:01:29.200 --> 0:01:31.840 Or to put it another way, the world has gone 0:01:31.840 --> 0:01:35.360 from watching for the day that oil supply peaks to 0:01:35.440 --> 0:01:39.679 trying to predict the day when oil demand peaks. All 0:01:39.720 --> 0:01:42.640 this matter is because burning oil contributes about a third 0:01:42.680 --> 0:01:46.320 of global emissions, and getting to net zero will mean 0:01:46.400 --> 0:01:50.440 finding ways to wean the economy of this still essential commodity. 0:01:51.200 --> 0:01:54.400 There's also that tiny matter that oil commands the most 0:01:54.440 --> 0:01:59.520 attention in global geopolitics among all other commodities. What happens 0:01:59.520 --> 0:02:02.440 to the major oil powers once the world starts wanting 0:02:02.600 --> 0:02:06.400 less oil. This week is a good time to talk 0:02:06.440 --> 0:02:10.079 about it because is the fiftieth anniversary of the OPEC 0:02:10.160 --> 0:02:13.600 oil embargo in nineteen seventy three, and those powers showing 0:02:13.680 --> 0:02:16.520 how much of a stranglehold oil can have on the 0:02:16.520 --> 0:02:17.440 global economy. 0:02:17.840 --> 0:02:21.040 The oil producing countries of the Arab world decided to 0:02:21.160 --> 0:02:24.360 use their oil as a political weapon. They will reduce 0:02:24.440 --> 0:02:27.920 oil production by five percent a month until the Israelis 0:02:27.960 --> 0:02:30.000 withdrawal from occupied territories. 0:02:30.200 --> 0:02:32.960 As expected, there was a huge reaction in countries like 0:02:33.000 --> 0:02:33.480 the US. 0:02:33.880 --> 0:02:36.240 This is a pearl harbor again, as far as the 0:02:36.320 --> 0:02:38.520 United States is concerned because of the fact that it 0:02:38.880 --> 0:02:41.760 invasions a whole change in our lifestyle, a whole change 0:02:41.760 --> 0:02:43.840 in the way this country has been built. 0:02:44.040 --> 0:02:47.680 All that happened because Arab countries were opposing Western countries 0:02:47.760 --> 0:02:51.799 support for Israel in the nineteen seventy three Arab Israeli war. 0:02:52.880 --> 0:02:55.480 It's tragic that almost to the date, the region is 0:02:55.520 --> 0:03:00.440 experiencing yet another war and yet another humanitarian crisis. Back 0:03:00.480 --> 0:03:03.880 in nineteen seventy three, oil producing nations could use oil 0:03:03.880 --> 0:03:08.280 as a weapon because supply was an issue. Now David 0:03:08.280 --> 0:03:11.040 predicts that demand is going to be the issue. That 0:03:11.120 --> 0:03:15.040 is the day humanity can say, dear Oil, it's not you, 0:03:15.400 --> 0:03:19.200 it's me is on the horizon. In fact, last year, 0:03:19.280 --> 0:03:21.560 David wrote a column where he said pea coil has 0:03:21.600 --> 0:03:25.359 finally arrived. No really, So I invited David to come 0:03:25.400 --> 0:03:27.560 on the show to help me understand why the world 0:03:27.639 --> 0:03:30.560 cares so much about pea coil, why he still thinks 0:03:30.600 --> 0:03:33.160 his prediction is the right one, and to explore the 0:03:33.200 --> 0:03:51.040 truly wild world we will enter after oil demand peaks. David, 0:03:51.120 --> 0:03:54.600 Welcome to the show. Hey, this is an interesting week 0:03:54.680 --> 0:03:57.360 to talk about what we are going to talk about, 0:03:57.440 --> 0:04:02.600 which is peak oil. It is the fiftieth anniversary of 0:04:02.840 --> 0:04:07.600 a pivotal week in energy history. I'm talking about the 0:04:07.720 --> 0:04:12.040 nineteen seventy three oil crisis, which began on the seventeenth 0:04:12.080 --> 0:04:14.720 of October. So can we just start there as a 0:04:14.760 --> 0:04:18.960 moment in time which changed the world and perhaps bring 0:04:19.000 --> 0:04:22.159 it to a point where you feel peak oil is 0:04:22.200 --> 0:04:24.479 a thing that people started to talk about. 0:04:24.680 --> 0:04:27.640 Absolutely, I think something we're going to talk about throughout 0:04:27.680 --> 0:04:31.960 this conversation is about the interplay between supply and demand. 0:04:32.320 --> 0:04:35.200 The seventy three oil crisis and also the seventy nine 0:04:35.200 --> 0:04:37.680 to one, which in some ways had a more lasting effect, 0:04:37.760 --> 0:04:41.200 which is proked by the revolution in Iran. Obviously, they 0:04:41.200 --> 0:04:43.760 were events in the history of oil supply, but they 0:04:43.760 --> 0:04:46.680 had immense consequences on the history of oil demand. If 0:04:46.680 --> 0:04:50.120 you look at oil demand projections before nineteen seventy three 0:04:50.320 --> 0:04:53.760 through the fifties and sixties, energy demand was increasing at 0:04:53.760 --> 0:04:56.960 a rate that looked almost exponential. You had these very 0:04:57.040 --> 0:05:01.479 dramatic projections about how fast demand energy and in particular oil, 0:05:01.560 --> 0:05:04.200 was going to go up overcoming decades. And that trend 0:05:04.279 --> 0:05:06.719 was broken by nineteen seventy three and it's for very 0:05:06.720 --> 0:05:11.920 obvious reasons. Supply and availability of oil suddenly looked less secure, 0:05:12.680 --> 0:05:15.960 and so consumers had to sort of start rethinking a 0:05:15.960 --> 0:05:17.720 lot of the things that they were doing. So, I mean, 0:05:17.760 --> 0:05:20.240 the most obvious example of this was that in nineteen 0:05:20.279 --> 0:05:22.640 seventy three, about a third of the world's oil went 0:05:22.640 --> 0:05:27.720 into fuel boilers it was producing electricity. That is now 0:05:27.800 --> 0:05:30.320 about seven percent of the world's oil. The world has 0:05:30.360 --> 0:05:34.440 given up on that because essentially after seventy three, European economies, 0:05:34.480 --> 0:05:36.560 a lot of the US, they turned to domestic coal 0:05:36.600 --> 0:05:41.040 reserves instead. France turned to nuclear of course famously, and 0:05:41.120 --> 0:05:45.200 we saw the birth of a lot more investment in renewables, 0:05:45.200 --> 0:05:47.720 although of course at that stage it was far too 0:05:47.760 --> 0:05:50.000 early stage. But what we saw was that when you 0:05:50.040 --> 0:05:53.040 have a supply problem, demand starts to respond. And that's 0:05:53.080 --> 0:05:55.000 been a lesson that continues for decades. 0:05:55.839 --> 0:05:59.159 So in initial days, you know, this is talking from 0:05:59.200 --> 0:06:03.480 the nineteen seventy era, when the term peak oil was used, 0:06:03.960 --> 0:06:08.200 it almost always meant peak oil supply. But today we're 0:06:08.240 --> 0:06:11.400 talking about a very different kind of peak oil. 0:06:11.800 --> 0:06:13.839 Yes, absolutely, I mean, in fact, if you look at 0:06:13.920 --> 0:06:17.520 the projections for peak oil supply, they go back even 0:06:17.560 --> 0:06:19.960 further than that. At one point, I remember looking at 0:06:19.960 --> 0:06:23.360 this in nineteen nineteen, the chief geologist of the US 0:06:23.400 --> 0:06:27.560 Geological Survey said that the US domestic output, this was 0:06:27.600 --> 0:06:29.920 no one was even projecting anything on a global basis 0:06:29.960 --> 0:06:32.640 at that point. They said that within two to five years, 0:06:32.880 --> 0:06:36.160 US oil production was going to start declining. And at 0:06:36.160 --> 0:06:38.000 that point it was about one million barrels per day. 0:06:38.120 --> 0:06:42.080 So it's thirteen million barrels per day now more or less. 0:06:41.960 --> 0:06:44.760 Whether it's in the case of supply or it's in 0:06:44.760 --> 0:06:48.200 the case of demand. We care a lot about pea coil. 0:06:48.839 --> 0:06:52.000 Why is it that we care so much about pea coil? 0:06:52.520 --> 0:06:54.640 If you look around you you can see how important 0:06:54.680 --> 0:06:57.200 to US oil is in all sorts of ways. From 0:06:57.200 --> 0:07:00.960 the consumption point of view, obviously the cars we drive, 0:07:01.160 --> 0:07:04.039 the consumer products that we have. Oil is in a 0:07:04.120 --> 0:07:06.680 vast array of uses. It's not just cars, it's the 0:07:06.680 --> 0:07:08.560 trucks that drive things, the planes that we fly, the 0:07:08.640 --> 0:07:11.440 ships that move things around. Also like the plastics and 0:07:11.520 --> 0:07:16.000 consumer goods, the greases, the asphalt on the roads, it's everywhere. 0:07:16.240 --> 0:07:19.160 Of course, From the climate perspective as well, oil is 0:07:19.280 --> 0:07:22.240 one of the largest contributors to climate change, and that's 0:07:22.280 --> 0:07:25.000 something that we need to reduce. So before we were 0:07:25.040 --> 0:07:28.880 worried about peak oil supply, we were worried, gosh, we're 0:07:28.920 --> 0:07:30.840 not going to be able to have all these useful 0:07:30.840 --> 0:07:34.080 consumer goods that oil provides us. We're less worried about that. 0:07:34.160 --> 0:07:35.960 Now we're more worried about the fact that oil is 0:07:35.960 --> 0:07:39.560 actually destroying the environment around us. We are concerned about 0:07:39.880 --> 0:07:43.360 ways to substitute and reduce substitution is I think the 0:07:43.400 --> 0:07:45.440 thing that's really changed in this area when we're talking 0:07:45.440 --> 0:07:49.480 about peak oil demand. There are alternative ways of doing 0:07:49.560 --> 0:07:53.160 the things that oil does, for instance, electric vehicles, bio 0:07:53.200 --> 0:07:57.600 fuels in conventional vehicles, and alternative feedstocks like hydrogen for 0:07:57.640 --> 0:08:00.720 the chemicals industry. And that's what's changed at the moment. 0:08:01.080 --> 0:08:05.000 So you published a bold article last year which started 0:08:05.080 --> 0:08:08.520 with sort of a trepidation. Yes, it said, I'm going 0:08:08.600 --> 0:08:10.680 to make a bold claim, and I may come to 0:08:10.760 --> 0:08:14.160 regret it, but my bold claim is that peak oil 0:08:14.240 --> 0:08:17.760 demand is here. Twelve months on, tell us why you 0:08:17.800 --> 0:08:21.160 thought peak Alderman is here, and do you think you're 0:08:21.200 --> 0:08:21.720 still right? 0:08:22.000 --> 0:08:25.120 Sure? Yeah, well, yeah, I mean the main reason I 0:08:25.160 --> 0:08:27.200 wrote the column at the time was that it was 0:08:27.240 --> 0:08:30.320 a period of very sharp tightening by the US Federal Reserve, 0:08:30.600 --> 0:08:34.079 and at that point everyone was predicting that the world 0:08:34.160 --> 0:08:37.120 was going to face quite a severe global recession, really 0:08:37.120 --> 0:08:39.600 on the scale of the Volka Recession of the early eighties. 0:08:39.840 --> 0:08:42.720 You know, this was when Paul Volka, the US Federal 0:08:42.760 --> 0:08:45.840 Reserve governor, tried to stamp out inflation in the wake 0:08:45.880 --> 0:08:49.280 of the nineteen seventy nine oil crisis during the Irana 0:08:49.400 --> 0:08:52.720 ark War, and that's one of the most dramatic reductions 0:08:52.760 --> 0:08:54.920 in oil demand that we've seen in history. The argument 0:08:54.920 --> 0:08:57.120 I made at the time was essentially that we saw 0:08:57.160 --> 0:08:59.960 a recession on that scale that was probably going to 0:09:00.040 --> 0:09:03.240 crimp oil demands until the mid twenty twenties, sort of 0:09:03.240 --> 0:09:05.599 twenty twenty five, and at that point we start to 0:09:05.640 --> 0:09:08.760 see some of these long term factors like rising energy 0:09:08.800 --> 0:09:11.959 efficiency in vehicles and the rise of electric vehicles, mean 0:09:12.040 --> 0:09:15.480 that oil is entering a secular decline. Now, there has 0:09:15.480 --> 0:09:17.840 not been a global session. In fact, the global economy 0:09:17.840 --> 0:09:22.680 has grown extremely strongly. We're really sort of above trend growth. However, 0:09:23.000 --> 0:09:25.439 the specific prediction I made was about crude oil. 0:09:26.000 --> 0:09:29.920 Yeah, so let's do that because it is nerdy. Beyond 0:09:29.960 --> 0:09:33.760 the fact that you can make these pronouncements about peak oil, 0:09:34.080 --> 0:09:36.680 oil is not one thing. We kind of think of 0:09:36.720 --> 0:09:38.600 it as a commodity, but it's not one thing. So 0:09:38.679 --> 0:09:41.640 let's just break it down and then explain to us 0:09:41.800 --> 0:09:43.840 where you think we have reached a peak. 0:09:44.400 --> 0:09:46.319 If you think about how you measure oil, it's actually 0:09:46.400 --> 0:09:49.120 quite a difficult thing to measure oil demand. And you 0:09:49.160 --> 0:09:50.800 can go right back to the nineteenth century. You know, 0:09:50.920 --> 0:09:54.120 John d. Rockefeller and standard oil. John d. Rockefeller was 0:09:54.160 --> 0:09:57.880 not controlling oil fields all supply. He controlled refineries, and 0:09:57.960 --> 0:10:01.160 refineries are the bottleneck in the global oil supply chain. 0:10:01.240 --> 0:10:03.080 So if you want to count how much oil is 0:10:03.120 --> 0:10:05.760 being consumed, the best way to do is go to 0:10:05.760 --> 0:10:07.920 the gate of a refinery and measure how much is 0:10:07.920 --> 0:10:10.920 coming out of a refinery. And so generally when you 0:10:11.000 --> 0:10:14.880 hear the OPEC or the International Energy Agency saying like 0:10:15.080 --> 0:10:17.439 what is the level of oil demand, essentially what they're 0:10:17.480 --> 0:10:20.040 saying is how many barrels are coming out of oil refineries. 0:10:21.760 --> 0:10:25.680 David is making an important distinction here when measuring oil consumption, 0:10:26.240 --> 0:10:29.760 organizations like the International Energy Agency and OPEC are not 0:10:29.840 --> 0:10:33.440 counting what's going into the refinery, but what's coming out. 0:10:34.200 --> 0:10:37.200 For much of history, refineries took in pretty much only 0:10:37.320 --> 0:10:40.240 crude oil, so the amount of refined products was a 0:10:40.240 --> 0:10:43.000 good proxy for the amount of oil coming out of 0:10:43.000 --> 0:10:46.679 the ground. That's changed over the past few decades, and 0:10:46.720 --> 0:10:49.640 now refined products come not just from crude oil, but 0:10:49.720 --> 0:10:53.320 also bio fields and natural gas liquids. And because a 0:10:53.360 --> 0:10:56.000 barrel of refined products can be made from more than 0:10:56.040 --> 0:10:59.559 one source, it means there can be a significant difference 0:10:59.600 --> 0:11:02.240 between the amount of crude ole going into a refinery 0:11:02.559 --> 0:11:05.120 and the number of barrels of refined products coming out. 0:11:06.080 --> 0:11:10.720 Global supply of refined products, so things like gasoline and 0:11:10.760 --> 0:11:13.960 diesel and jet field and things like that, that's about one hundred, 0:11:14.040 --> 0:11:16.880 one hundred and one hundred and two million barrels per day. 0:11:17.200 --> 0:11:20.720 Global supply of crude oil, which is what we think 0:11:20.720 --> 0:11:23.040 of as oil black stuff, you know, that will fit 0:11:23.120 --> 0:11:26.079 in a barrel that's subject to opec quotas the stuff 0:11:26.080 --> 0:11:28.280 that's quoted on the news for the price of West 0:11:28.280 --> 0:11:32.280 Texas intoneedit or brent. That's only about eighty three million 0:11:32.320 --> 0:11:34.760 of those one hundred million barrels, probably a little bit 0:11:34.840 --> 0:11:37.079 less than that. At the moment crude ol, which was 0:11:37.120 --> 0:11:39.600 what I made this prediction about. We are still actually 0:11:39.640 --> 0:11:43.680 below twenty eighteens levels of crude oil demand at this point, 0:11:43.760 --> 0:11:47.240 and the International Energy Agency, if you look through their numbers, 0:11:47.480 --> 0:11:50.360 they don't predict that next year we're going to exceed 0:11:50.440 --> 0:11:54.360 twenty eighteen's levels of crude oil demand. So at this point, 0:11:54.360 --> 0:11:56.520 crude ole demand is still below its peak. And there's 0:11:56.559 --> 0:11:59.600 a lot of headlines you'll see about we're seeing record 0:11:59.600 --> 0:12:02.080 old demind but that's actually largely to do with growth 0:12:02.080 --> 0:12:05.360 and biofueld supply and to a similar extent, growth in 0:12:05.559 --> 0:12:07.880 natural gas. Liquid's not actually in crude oil. 0:12:08.160 --> 0:12:11.640 Okay, So what you've just said is basically oil demand, 0:12:12.600 --> 0:12:16.480 as we understand all kinds of product demand is growing 0:12:17.280 --> 0:12:22.320 and is at a new peak, but the black goole 0:12:22.440 --> 0:12:27.199 that is feeding that oil demand has actually peaked. There 0:12:27.280 --> 0:12:31.680 is all this other stuff, some of which is actually biofields, 0:12:31.960 --> 0:12:36.560 which is the fastest growing segment of supply. Why have 0:12:36.679 --> 0:12:39.679 biofields become such a big part of the supply mix? 0:12:40.280 --> 0:12:44.080 Biofields is essentially policy. One of the earliest responses to 0:12:44.080 --> 0:12:47.600 the seventy three oil crisis was Brazil started introducing very 0:12:47.840 --> 0:12:51.400 dramatic biofield mandates from the nineteen eighties. We've added the 0:12:51.520 --> 0:12:54.320 US to that in the two thousands. In the late nineties, 0:12:54.679 --> 0:13:00.000 hardly any US crops went into making fuel. At this point, 0:13:00.440 --> 0:13:04.480 more US crop volume goes into making fuel than goes 0:13:04.480 --> 0:13:09.000 into making food for Americans. It's grown to that extent, 0:13:09.360 --> 0:13:12.360 and we're seeing other countries moving in the same direction. 0:13:12.880 --> 0:13:15.319 Just in the past twelve months, India has doubled its 0:13:15.320 --> 0:13:20.239 biofuel mandate I think, to twenty five percent from ten percent. Indonesia, 0:13:20.280 --> 0:13:23.920 another big source of transport demand growth, has raised its 0:13:24.000 --> 0:13:26.000 bar fuel mandate to twenty five and I think is 0:13:26.000 --> 0:13:28.120 going to fifty percent in the next few years. These 0:13:28.160 --> 0:13:30.880 are quite significant slices of oil demand. 0:13:31.280 --> 0:13:34.000 So if that is the case, and yes, let's assume 0:13:34.040 --> 0:13:38.040 the total demand for oil will continue to grow as 0:13:38.120 --> 0:13:42.560 many predictions say it will. But if biofields also continue 0:13:42.559 --> 0:13:46.280 to grow, why did you feel any trepidation making the 0:13:46.360 --> 0:13:50.600 claim that crude oil demand has beaked. 0:13:51.240 --> 0:13:53.319 I think the reason for that is that every prediction 0:13:53.360 --> 0:13:56.840 anyone has ever made for history has turned out to 0:13:56.880 --> 0:14:00.200 be transted wrong. And this is about a series of 0:14:00.559 --> 0:14:03.400 lines on a chart and the direction that they're moving, 0:14:03.679 --> 0:14:05.960 and I think if I can give common ground that 0:14:06.000 --> 0:14:09.400 really very few people would disagree on the amount of 0:14:09.559 --> 0:14:14.160 liquid fuels demand over the coming decade. The pace of 0:14:14.200 --> 0:14:17.439 growth has clearly slowed. Even oil bulls would agree about that. 0:14:17.880 --> 0:14:20.400 And so we're on about one hundred and two million 0:14:20.440 --> 0:14:23.240 barrels a day of liquid fuels demand. You don't see 0:14:23.240 --> 0:14:26.240 many predictions heading much above, say one hundred and five 0:14:26.520 --> 0:14:29.760 million barrels a day, and maybe some people do predict that, 0:14:29.840 --> 0:14:33.040 but that's over the previous decade. I think I'll supply increase. 0:14:33.160 --> 0:14:36.360 Liquid fueld supply increase by say ten million barrels a day. 0:14:36.760 --> 0:14:39.000 So we're quite close to the peak in that sense. 0:14:39.280 --> 0:14:41.960 And the question is how much of that peak gets 0:14:42.320 --> 0:14:44.840 used up by crude oil, how much gets used up 0:14:44.840 --> 0:14:47.840 by biofuels, how much is natural gas liquids, and how 0:14:47.920 --> 0:14:52.040 much is processing gains. The argument I've made is that biofuels, 0:14:52.200 --> 0:14:55.440 natural gas, liquids, and process and gains, they make up 0:14:55.960 --> 0:14:57.360 all of that increase in supply. 0:14:58.880 --> 0:15:01.640 You might be wondering if having more biofuels in the 0:15:01.680 --> 0:15:04.720 mix is a good thing for the climate. It's really 0:15:04.760 --> 0:15:08.320 complicated to calculate how much carbon saving can be achieved 0:15:08.360 --> 0:15:12.680 with biofuels. What most studies agree on is that biofuels 0:15:12.720 --> 0:15:16.080 aren't carbon neutral. Just because they come from growing food 0:15:16.360 --> 0:15:19.640 that captures carbon dioxiet in the process of growth does 0:15:19.680 --> 0:15:23.720 not mean biofields do not have additional emissions. Processing crops 0:15:23.720 --> 0:15:29.000 into fuel requires energy. Burning biofuels creates air pollution. That's 0:15:29.000 --> 0:15:32.120 why biofuelds for road transport isn't a good solution to 0:15:32.160 --> 0:15:35.120 pursue in the long term. Instead, it's better to focus 0:15:35.200 --> 0:15:38.240 on using biofuels to reduce emissions from aviation. 0:15:40.400 --> 0:15:42.640 There are more people in the world who are buying 0:15:42.800 --> 0:15:46.280 vehicles as incomes rise, there are more trucks moving around, 0:15:46.280 --> 0:15:48.600 people are flying, or there's all those things that are 0:15:48.640 --> 0:15:53.160 increasing top level demand. But also every vehicle in the 0:15:53.200 --> 0:15:55.800 world has been getting more efficient. This is actually not 0:15:55.840 --> 0:15:58.440 as much about the rise of electric vehicles. It's actually 0:15:58.480 --> 0:16:01.640 about fuel efficiency rules that have been implemented for about 0:16:01.640 --> 0:16:06.040 fifteen years Obama era fleet fuel economy rules, similar rules 0:16:06.040 --> 0:16:09.240 in Europe, the same sort of standards in China, in India. 0:16:09.760 --> 0:16:12.600 All of those vehicles from the sort of pre two 0:16:12.600 --> 0:16:15.000 thousand and eight era, they are now being scrapped. They're 0:16:15.000 --> 0:16:17.720 fifteen years old, and they're getting phased out of the fleet, 0:16:18.000 --> 0:16:21.720 and new vehicles are strikingly more efficient. I think if 0:16:22.440 --> 0:16:26.400 you look at some US examples, a current model car 0:16:26.880 --> 0:16:29.280 and just I have the numbers here in front of me, Actually, 0:16:29.520 --> 0:16:32.960 new US cars now travel twice as far per gallon 0:16:33.200 --> 0:16:35.240 as they did at the start of the Obama administration. 0:16:35.800 --> 0:16:39.840 And that's just normal US gasoline cars. So that is 0:16:40.080 --> 0:16:42.520 an incremental reduction in oil demand, and it's nothing to 0:16:42.520 --> 0:16:43.560 do with electric vehicles. 0:16:43.920 --> 0:16:47.920 As we know, there's an explosive growth in the number 0:16:48.000 --> 0:16:52.239 of electric vehicles being sold. The total oil demand destruction 0:16:52.760 --> 0:16:55.640 from all vehicles, not just cars, but buses and two 0:16:55.640 --> 0:16:58.520 wheelers and three wheelers is only about a million barrels 0:16:58.520 --> 0:17:01.680 a day of oil. So much of the game, so 0:17:01.800 --> 0:17:06.600 to speak, from decreasing demand has come from as you say, efficiency. 0:17:06.040 --> 0:17:09.400 Gains absolutely and so you know, if you break down 0:17:09.400 --> 0:17:11.240 the oil barrel, about a quarter of the oil barrow 0:17:11.280 --> 0:17:15.600 goes into gasoline, another thirty percent goes into diesel, and 0:17:15.640 --> 0:17:18.399 then the remainder about eight percent of it is actually 0:17:18.400 --> 0:17:21.399 just a fuel that oil refineries use. About fifteen percent 0:17:21.520 --> 0:17:25.440 is for shipping and for aviation and the rangers, petrochemicals, asphalt, 0:17:25.560 --> 0:17:27.840 that sort of thing. So you know, if you look 0:17:27.840 --> 0:17:31.240 at those different fractions of the barrel, fuel oil demand 0:17:31.400 --> 0:17:34.639 peaked way back in nineteen seventy nine, Gasoline demand according 0:17:34.640 --> 0:17:38.400 to the International Energy Agency, that peaks probably in twenty nineteen, 0:17:38.480 --> 0:17:40.919 and he's already in decline. Road Field demand as a 0:17:40.920 --> 0:17:43.239 whole is going to peak in the next sort of 0:17:43.400 --> 0:17:45.800 four to five years. And of course, the Fatty Birol, 0:17:45.920 --> 0:17:48.560 the head of the IEA, just said last month that 0:17:49.000 --> 0:17:51.560 oil demand and here he means not crude oil, he 0:17:51.640 --> 0:17:54.280 means liquid fuels demand as a whole that is also 0:17:54.359 --> 0:17:55.760 going to peak this decade. 0:17:56.320 --> 0:17:59.399 Just on a sidetrack here, Even as the IEA was 0:17:59.520 --> 0:18:03.159 born out of the fossil fuel era, in recent years 0:18:03.240 --> 0:18:06.320 it's become a lightning rod for all kinds of people, 0:18:06.520 --> 0:18:11.040 first climate people and now oil people, because every pronouncement 0:18:11.240 --> 0:18:15.119 it makes today it makes for massive headlines in energy press. 0:18:15.560 --> 0:18:20.200 And so this prediction that Fati Birol made you use 0:18:20.320 --> 0:18:24.440 this term, which is all fossil fuels will go into 0:18:24.520 --> 0:18:30.000 structural decline in this decade, including of course oil. Why 0:18:30.119 --> 0:18:35.080 is structural decline such an important phrase in there? 0:18:35.400 --> 0:18:38.480 I think that is because we have actually seen periods 0:18:38.520 --> 0:18:43.120 of cyclical oil demand in the past, and this has 0:18:43.160 --> 0:18:45.840 been driven by these economic factors that we talked about. 0:18:45.880 --> 0:18:48.840 I mean, essentially, one of the main reasons that people 0:18:49.000 --> 0:18:51.480 have always been very reluctant to make that call on 0:18:51.760 --> 0:18:55.680 peak oil consumption is that oil and economic growth. If 0:18:55.720 --> 0:18:59.200 you track global economic growth and oil supply, they track 0:18:59.280 --> 0:19:03.080 almost perfect because oil has for so long been the 0:19:03.080 --> 0:19:06.680 best way of producing energy, the best energy carrier. If 0:19:06.720 --> 0:19:10.080 you're predicting peak oil, it's like you're predicting peak economic growth, 0:19:10.080 --> 0:19:14.680 which is obviously a disaster for the world. And historically 0:19:14.720 --> 0:19:17.359 we've not had the substitutes for oil that we have 0:19:17.560 --> 0:19:20.240 right now, and I think that is why it is 0:19:20.280 --> 0:19:23.679 so important if you're talking about structural decline in oil demand. 0:19:23.760 --> 0:19:27.000 Until very recently you were talking about structural decline in 0:19:27.040 --> 0:19:29.600 the global economy. I don't think we are talking about 0:19:29.600 --> 0:19:33.200 that now because we do have these quite effective substitutes, 0:19:33.400 --> 0:19:36.560 and they're becoming more effective by the year. But that's 0:19:36.600 --> 0:19:39.240 the difference. We have seen these cyclical declines in oil demand. 0:19:39.280 --> 0:19:41.160 We saw it in the early eighties, when you had 0:19:41.240 --> 0:19:44.160 the nineteen seventy nine oil crisis. You had the Iuranarak War, 0:19:44.200 --> 0:19:47.040 you had the Vulka tightening at the federal reserve. We 0:19:47.160 --> 0:19:52.160 did actually see oil demand decline, but then that decline reversed. 0:19:52.760 --> 0:19:56.120 If you remember the old nineteen eighties American soap opera Dallas, 0:19:56.240 --> 0:19:59.320 Dallas was set in a period of oil decline, it's 0:19:59.320 --> 0:20:01.560 all about that, the sort of crises in the Texas 0:20:01.560 --> 0:20:04.440 oil fields, and it covers that turning point actually when 0:20:04.440 --> 0:20:07.520 the oil market started to reverse and demand started to 0:20:07.520 --> 0:20:10.359 grow again. Those are the sort of cyclical declines we've seen. 0:20:10.480 --> 0:20:12.879 We've not seen a structural one, and of course, if 0:20:12.880 --> 0:20:15.760 you're talking about heading to net zero, a structural decline 0:20:15.800 --> 0:20:17.159 is the one that you need. You don't want a 0:20:17.160 --> 0:20:20.639 temporary blit. You actually need decline to decline forever. 0:20:26.040 --> 0:20:27.960 One other thing that came out of the nineteen seventy 0:20:27.960 --> 0:20:31.679 three oil crisis was the International Energy Agency. If you 0:20:31.680 --> 0:20:33.639 want to learn more about it, you can listen to 0:20:33.720 --> 0:20:37.240 an interview with the current head, Fatty Birole, in our archives. 0:20:37.480 --> 0:20:40.240 There's a link in the show notes. After the break, 0:20:40.520 --> 0:20:55.919 Humanity says to Oil, it's not you, it's me, in 0:20:55.960 --> 0:21:00.920 response to the IA's prediction about structural decline in oil demand. 0:21:01.080 --> 0:21:05.040 OPEK had an interesting response. It said, it is an 0:21:05.080 --> 0:21:09.520 extremely risky and impractical narrative to dismiss fossil fuels or 0:21:09.560 --> 0:21:12.800 to suggest that they are at the beginning of their end. 0:21:13.359 --> 0:21:16.800 In past decades, there were often calls of peak supply 0:21:17.160 --> 0:21:21.480 and in more recent ones, peak demand. But evidently neither 0:21:21.680 --> 0:21:25.879 has materialized, and those are all facts. And yet the 0:21:26.040 --> 0:21:29.600 tone is an interesting one, a tone that I'd like 0:21:29.640 --> 0:21:33.200 to explore by just trying to understand what happens after 0:21:33.480 --> 0:21:37.520 we reach peak oil. Because maybe you're right that we 0:21:37.680 --> 0:21:40.880 have reached pea coil. Maybe you're wrong, maybe crude oil 0:21:40.960 --> 0:21:45.160 demand actually does peak later in the century. However, what 0:21:45.400 --> 0:21:49.639 is I think no longer a question of contention, is 0:21:49.680 --> 0:21:53.840 that eventually the demand for oil will peak. What is 0:21:54.080 --> 0:21:57.160 more interesting is what happens after. 0:21:57.600 --> 0:22:00.200 I think the first thing I would say is what 0:22:00.359 --> 0:22:05.639 does the liquid fuels sector look like after peak crude 0:22:05.640 --> 0:22:08.520 oil consumption. A crucial part of that is, of course, 0:22:08.560 --> 0:22:11.639 how fast do liquid fuels decline? And I think the 0:22:11.720 --> 0:22:13.640 best answer is probably not as fast as we would 0:22:13.720 --> 0:22:16.159 like them to be declining, because of course you are 0:22:16.200 --> 0:22:18.840 going to see this decline in transport fuels, which is 0:22:18.920 --> 0:22:21.680 fifty fifty five percent of the barrel road fuels. Rather, 0:22:22.160 --> 0:22:26.119 that's going to accelerate as electric cars penetrate and as 0:22:26.160 --> 0:22:28.920 the old vehicles get more efficient. But of course you've 0:22:28.960 --> 0:22:31.560 also got this other forty five percent of the barrel, 0:22:31.960 --> 0:22:33.720 which is shipping fuel. 0:22:33.680 --> 0:22:36.960 And aviation fuel, which we are hearing about in the background. 0:22:37.119 --> 0:22:39.840 Yes, right over my house, but yes, you know, forty 0:22:39.880 --> 0:22:42.240 five percent of the oil barrel, fifteen percent of it 0:22:42.280 --> 0:22:45.000 is shipping an aviation fuel. Shipping fuel is actually quite 0:22:45.000 --> 0:22:48.159 an interesting one. We're seeing quite a rapid change in 0:22:48.200 --> 0:22:51.480 the engines of ships being built with alternative fuels, which 0:22:51.480 --> 0:22:54.320