‘Peak demand’ oil theory fails scrutiny test.

Mark Lewis in the FT: “Oil market commentators increasingly dismiss the very idea of supply-side constraints on the oil market, pointing to the recent surge in light-tight oil production from US shale deposits and the existence of vast shale formations elsewhere in the world.”
“Instead, the “peak demand” argument goes, the maturity of markets such as the US, the EU and Japan means demand in the industrialised world is already on a structural downtrend, and – together with ongoing improvements in energy efficiency and the opportunities for substituting gas for oil – this will inevitably lead to a peak and then a decline in the demand for oil globally. Some say the peak could come within five years.
But does this peak demand theory bear scrutiny? Looking at the case of the US in more detail, it is certainly true that in recent years US demand has seen a material decline from the highs reached before the global financial crisis. Data from the US Energy Information Administration show average consumption of 18.8m barrels a day over the four years 2009-12, compared with 20.5mbd over 2005-08, a drop of 1.7mbd or 8.3 per cent.
The question, though, is whether this drop is structural.
US oil consumption
rose by 900,000 barrels a day in September, the fastest rate of growth in nearly a decade. Moreover, from data for 2013 released by the EIA recently, it is now clear that US demand not only increased last year, but accelerated rapidly over the course of the year.
Full-year growth in 2013 US oil consumption was 1.7 per cent, but year-on-year growth in the second half was 3.2 per cent and in the fourth quarter 3.8 per cent. Total demand in the week of December 13 was just shy of 21mbd, the highest weekly consumption figure for almost six years. Indeed, fourth-quarter demand of 19.7mbd was in line with the average annual consumption registered in 2008.
….All of this implies that the reduction in US oil demand over 2008-12 was not so much structural as due mainly to the weakness of the US economy following the global financial crisis, and the tightness of the local oil market until recently. As the economy has started to recover and rising domestic supply has made local prices more affordable, US consumers – whose ranks have swollen by 14m since 2007 – have started coming back to market.
Against this backdrop, the peak-demand narrative looks deficient at best and a distraction at worst.”