As soon as five years from now, global demand for oil might stop growing. That prediction may not seem surprising, if it came from an environmental group, but in a recent conference call, it caused a stir. Oil companies don鈥檛 usually talk publicly about people losing interest in their product.
So, if demand really does stop growing, what would that mean and how could it happen?
Jim Krane at Rice University鈥檚 is reminded of a quote from former Saudi Arabian Oil Minister Ahmed Zaki Yamani: 鈥淭he stone age didn鈥檛 end for lack of stones.鈥�
That鈥檚 to say, demand doesn鈥檛 end because supply ends. It ends because people start using other sources of energy. What would they use to replace the world鈥檚 most popular transportation fuel? Many people hope renewables, but fossils fuels are also likely says Frank Wolak, director of Stanford's .
鈥淩ight now, the cheap energy BTUs, as I鈥檓 sure you're aware, is natural gas and coal,鈥� he said. 鈥淪o the fact that you see a peak demand in oil 鈥� it's not a surprise.鈥�
How would Texas, which produces more oil than any other state in the country, fare if demand peaks?
鈥淭exas will do just fine,鈥� Wolak said. 鈥淏ecause, basically, Texas produces a lot of natural gas.鈥�
Michael Webber is deputy director of the , agrees.
鈥淭he other thing is in Texas is we make a lot of money downstream, meaning we use cheap oil and cheap natural gas to make chemicals and fertilizers and other products," he said. 鈥淎nd, if there鈥檚 declining demand, perhaps, that means there will be maybe declining prices for those feedstocks, which means our chemicals companies maybe they鈥檒l be more competitive.鈥�
Declining oil prices would also make it cheaper to fill up your car.
鈥淭he price pressures would be to the downside more likely,鈥� said Denton Cinquegrana from the
Though Standford鈥檚 Wolak says he's not so sure.
鈥淚n order to produce even the same amount of oil, you鈥檝e got to continually find more oil in the ground,鈥� he said. 鈥淪o, that鈥檚 a dynamic that would say price may need to rise even though demand is staying steady.鈥�
Even if it鈥檚 not good news for your pocket book, Rice University鈥檚 Jim Krane thinks it may be good for the environment. He says a shift away from oil towards natural gas as a transportation fuel may reduce greenhouse gas emissions. But, like others, he was not convinced that Shell鈥檚 peak demand prediction was correct.
鈥淥ur own models here at the Baker Institute show that demand will continue to grow for a while,鈥� he said.
In the model he鈥檚 referring to increasing demand will be driven by economic growth in Asian countries, and that鈥檚 a belief held by big oil companies other than Shell.
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