Cassandra has moved. Ugo Bardi publishes now on a new site called "The Seneca Effect."

Friday, December 27, 2013

Peak demand: the sound of a single hand clapping

Speaking of "peak demand" about the present stasis in the world oil production is a little like the concept of "the sound of a single hand clapping" is an old Zen "koan." This riddle has been solved by Bart Simpson in recent times.

The concept of "peak demand" is gaining popularity in the discussion about peak oil. It is a good example of how a discussion can get lost in a no-man's land of unsupported ideas and concepts. Peak demand, in a certain way, is a rebuttal of the idea that we have limits to what we can do on this limited planet. So, the implication  is that the present lack of growth in world oil production (which is a prelude to the peak) and the reduction of consumption in OECD countries has nothing to do with physical limits: it is a choice we made. We decided to consume less oil because we are smart enough to have found ways to use less of it. So, you see? We are still in charge; we are still the masters of the planet.

It is a concept that, unfortunately, flies in the face of everything that's happening around us. Maybe people have been buying more efficient cars, but it also true that they are driving less miles per year.  Simply, they can't afford to drive as much as they used to and that hardly looks like a choice.

But, then, what is exactly meant as "peak demand"? Economists talk about demand and supply, and then state that demand must always be equal to supply. Which is fine as long as you see supply and demand as qualitative terms that help you conceptualize a market situation. You could say, "if coffee were to cost 20 dollars per cup, I would drink much less of it". Obvious.

But the curious thing is that neither supply nor demand are measurable alone except in some rather special cases. They are two faces of the same coin: speaking of "peak demand" is a little like asking what's the sound of a single hand (OK; I know that Bart Simpson has solved that one, but let's not go into that....).

It is the same with "peak supply" that is a typical straw man for cornucopians who still tend to accuse peakers of saying that we will be soon "running out of oil". We will not. Supply is determined by several factors: demand (what people are willing to spend for oil) combines with supply (how much money companies are willing to invest in extracting oil) to generate one measurable parameter, which is production. We can equate production with demand, and that's fine. But peak oil is neither peak demand nor peak supply. It is peak production.

So, the concept of "peak oil" is the result of a dynamic evolution of production and consumption which is determined mainly by how EROEI goes down with time as extraction proceeds. It can be modeled and it leads, indeed, to a bell shaped curve. See here:

In the end, it is fine to argue about peak demand. But at some point we'll have to stop arguing and think solutions.


(BTW: there are cases in which you COULD reasonably speak of demand being affected by factors other than prices. Think of silver: the technology of digital photography destroyed the demand for silver for photographic film. Fine, but two things: one is that there has not been any comparable technological discontinuity for fossil fuels. The other is that digital photography didn't reduce the silver demand. You don't see any reduction in the silver production during the past decades. Good ol' Jevons still rules. )


Ugo Bardi is a member of the Club of Rome, faculty member of the University of Florence, and the author of "Extracted" (Chelsea Green 2014), "The Seneca Effect" (Springer 2017), and Before the Collapse (Springer 2019)