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  Mar.1, 2021     
 

Peak Oil Demand?

The decline in oil demand related to the pandemic in 2020 has led many analysts to believe that peak global oil demand is more certain and imminent than previously expected. Oil demand is thought to be killed by changes in public behavior, such as working from home, and more profoundly, the recognition that battery technology can replace gasoline and diesel.  

In their latest report “The Pandemic and the End of Oil?”, Michael C. Lynch, distinguished fellow at Energy Policy Research Foundation Inc.and Ivan Sandrea, former chief executive officer and founder of Sierra Oil and Gas, note, however, that some predictions are just scenarios while others are ambitious and proposed by climate change policy advocates. Almost all involve various assumptions that are not well supported by real-world behavior.

Behavioral changes

Some argue that behavioral changes due to the pandemic, including remote working, virtual conferencing, and reduced driving, will become permanent.  

However, as noted by the two experts, contrary evidence comes from China, where the success in controlling the pandemic seems to have led to a near-normal recovery.  

They point, too, to work-from-home experiments prior to the pandemic where companies encountered serious drawbacks, noting “...the history of telecommuting has been strewn with failure,” and indeed, industry clustering has for decades been recognized as valuable, where companies in the same business gather geographically.

“This explains why, despite the difficulty and expense of commuting in areas like Manhattan and Silicon Valley, it has been hard to convince industries to move to less crowded and much cheaper locations. The proposition that a few months of remote working will suddenly negate the perceived benefits appears dubious,” Lynch said.  
 

BEV vs ICE

According to Lynch and Sandrea, the belief that battery electric vehicles (BEV) will soon become competitive with internal combustion engine (ICE) vehicles is based on questionable assumptions on both the future costs and performance of batteries and the value consumers place on convenience.  

Gasoline has 40 times the energy density of batteries and refueling times of 3-4 minutes are superior to the 20-40 minutes that even a fast charging station requires for a partial BEV charge.  

BEV range remains both shorter and less certain than for conventional cars. Publicized ranges typically assume optimal driving conditions, such as mild temperatures and no use of heating. Drivers are warned to typically use no more than 60% of a battery's charge without recharging. It is also the case that the published range given for battery packs needs to be discounted for normal usage.  

“Advocates of BEVs tend to be dismissive of these factors but they are clearly a concern for most consumers. They insist that range anxiety isn't real, it clearly is, as evidenced by the way advocates describe the supposed ease of coping with it: planning the route by researching charging stations in advance, taking a lunch or bathroom break while charging, minimizing use of the heater by wearing heavy clothes, and so forth,” the report said.  

“Comparison with the rapid switch from horses to the Model T, the first mass-produced auto, are flawed, as the Model T, while more expensive than a horse, had far superior performance while BEVs are not only more expensive than ICE vehicles, but they also perform much more poorly.”  

To date, success for BEVs has required substantial government subsidies. The subsidies themselves imply limited consumer acceptance, and generally fail.  

“Governments have generally failed when attempting to mandate consumer choice as experiences with bans on alcohol and narcotics have shown, to say nothing of efforts to improve the fuel efficiency of conventional vehicles,” according to the report. “Moreover, an increased market share for SUVs indicates that it is difficult to reconcile claims that consumers will sacrifice cost and comfort to help achieve the public good,” it said.  

The report also noted serious concerns about the environmental impact of BEVs and the reliance on imported materials such as rare earths.  

“The irrational exuberance of promoters of cleaner fuels and technologies is dominating the discussion at the expense of more solid analysis, and the inferior performance and economics of solar power and electric vehicles remain a major obstacle to any significant increase in their market share,” the report concluded.  
 

Conglin Xu
Managing Editor-
Economics

 

 

Editorial comment:

This was an Editorial written in the Oil & Gas Journal, a Weekly magazine read by most oil industry executives.

While it is self-serving to a degree, the oil and gas industry can smell out false premises and false science better than many less informed lay commentators, and it is basically fair comment.

The only viable long-term alternative to replace our current power systems with real clean energy  is not any of the proposed so-called green solutions, but Energy from the Vacuum, inexhaustible and free for the taking.

 

HONDA CHAIRMAN TAKEO FUKUI

"Even the best internal-combustion engines still waste more than 80% of the energy created by burning gasoline."


Reported in Wall Street Journal
July 25th, 2005

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