Worldwide oil consumption has been on an upward trajectory as of late, and with the Covid pandemic subsiding in much of the world, it appears that resumption in demand will soon be obvious this year and next.
For example, with consumption data going back to 1997 and a forecast to 2022 from the U.S. Energy Information Administration, here are some relevant statistics about the quarter-century trend.
In 1997, worldwide oil consumption was 72.1 million barrels daily. That demand grew steadily, including through 9/11, and reached a new high of 86.7 million barrels daily in 2008. The Great Recession stalled consumption growth a bit, dropping by 900,000 barrels daily in 2009, to 85.8 million daily barrels.
Post-recession, worldwide consumption grew again from 88.7 million barrels in 2010 to hit a new high of 100.9 million barrels daily in 2019. Last year, in 2020, demand dropped to 92.3 million barrels, as the Covid pandemic hit and as governments and businesses shut down much of the economy around the world.
However, the EIA forecast for the current year is 97.7 barrels of oil consumed daily, with 101.4 million barrels of oil used daily in 2022. In other words, if the U.S. forecast is correct, by next year worldwide oil consumption will again hit new daily highs. As of 2022, half-a-million more barrels of oil per day will be used by consumers, businesses and governments than in the previous peak year in 2019.
A caveat: As smart investors often remark, past performance is no guarantee of future returns.
That is true. And for oil, plenty of politicians, pundits and even the International Energy Agency are not only predicting but working towards oil’s near-term demand destruction. Thus, the theory goes, there is no guarantee the next 25 years will look like the past 25 years.
Conversely, they are also not realistically accounting for growing energy demand in Africa and Asia where dense energy—energy that can physically accomplish much—is needed.
Thus, how seriously one takes the claim oil will soon be on a permanent downslope in part depends on if one believes other energy (renewables among the possibilities) can replace oil and also natural gas any time soon.
One reason to think the parade of opinion on oil’s imminent demise is wrong comes from Vaclav Smil, University of Manitoba professor of the environment (emeritus). Smil is one of the world’s leading experts on energy transitions In his book, Energy, Smil noted that before abandoning something as a source of energy, we must consider how little (or much) of that source it takes to produce the outcomes we need, i.e., the physics of it all.
On the issue of technological feasibility, Smil has also noted that “the reality of energy density in various forms of energy sources (be they oil, natural gas, coal, wind, solar and others) must be accounted for as part of any assumed transition.” In 2018, Science magazine cited Smil’s point that energy transitions are normally transitions away from “relatively weak, unwieldy energy sources for those that pack a more concentrated punch.” Instead, what we’re seeing in current attempts to transition away from fossil fuels does the opposite.
If Smil is correct—and there’s every reason to prefer his independent mind and conclusions derived from hard data over opinions of uninformed convenience—then the next question is which countries will extract the oil necessary for 100-million plus barrels consumed daily.
Answer: If Canada’s oil sector is artificially constrained, there are multiple other countries that will explore for, extract and export oil.
For perspective, Canada has the third largest proved oil reserves at 170 billion barrels, behind Saudi Arabia at 298 billion barrels and Venezuela at 304 billion barrels. The United States has proved reserves of 69 billion barrels (ninth largest in the world).
Assume that one day Canada and the United States exit the oil business. The other top ten oil-reserve countries will be able to fill whatever supply the world needs.
The remaining eight of the top 10 countries include Libya, the United Arab Emirates, Kuwait, Russia, Iraq, Iran, Saudi Arabia, and Venezuela, though production in the latter has slowed to a crawl given self-harming political disruption which has made oil production nearly impossible. The combined proved oil reserves of these eight countries is over 1.2 trillion barrels.
Or expressed another way, with current production in play, Canada has 82 years of oil left. The years left for other countries in that top ten list are as follows: the United States (11 years) Russia (25 years), the United Arab Emirates (67 years), Saudi Arabia (69 years), Iraq (83 years), Kuwait (93 years), Libya (108 years), Iran (121 years), and the only other country engaging in self-harm against itself including its oil sector, Venezuela (906 years).
Canadians can choose to self-harm the oil industry and try and limit it/shut it down based on opinions about future demand. Or it can take the approach of Smil to recognize energy density realities. Either way, there are plenty of other countries that will take Canada’s market share if Canada exits the oil business.
Mark Milke and Ven Venkatachalam are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report, Worldwide Oil Reserves and Investments: Key Facts.
The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd.