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Editorial comment

I was recently sent an email, and whilst the writer said that they are a fan of Hydrocarbon Engineering, they asked why I discuss outlooks in my editor’s comment when the world is changing so rapidly and no one can really predict the future? I do indeed fully admit that no one can accurately predict the future and when it comes to the oil and gas sector I think we can all safely say that peak oil is one phenomenon that was predicted but hasn’t come to pass. At the time that M. King Hubbert put forward his theory of peak oil, based on his then research, I’m sure it was thought valid. Also in the years that followed there was much debate about peak oil as supply and demand levels fluctuated. Even I wrote about the peak oil debate back in 2012 when I came across a report written by Leonardo Maugeri, which said that we were not yet in a position to announce peak oil as supply was growing worldwide at such a fast pace it was possibly going to overtake consumption. So yes, on one hand, the Hydrocarbon Engineering fan is indeed correct to point out that we can’t always make accurate predictions, but on the other, I believe that we can make predictions, as long as they are based on solid information and comment on what is most likely to happen if the status quo remains.The above moves me swiftly on to the new phenomenon of peak demand, which appears to have placed the peak oil theory firmly on ice. I believe we can clearly see this due to the fact that, despite the dramatic plummet in oil prices from summer 2014 highs, demand for oil hasn’t shot up. The general rules of consumption are that as prices go down then more of a product is bought, but this hasn't been the case for oil and this can be attributed to many factors. Firstly, as Bank of America Merrill Lynch said in a recent Global Energy Weekly, “the sensitivity of global consumption [of oil] to near term price changes in prices is low.” Also, there is now greater energy efficiency globally and this is particularly true for the transportation sector, which is the biggest consumer of oil and oil products. And finally, energy intensive economies are currently going on a bit of a diet, and we all know that China can be taken as a big example of that. So, as more and more oil is pushed on to the market between new unconventional resources coming to fruition and OPEC maintaining its output levels, I think we can safely say that a demand peak is upon us. And that is a prediction I will firmly stand by, be it for this moment in time only, as that is what the data shows me.As I said at the start, whilst we cannot make 100% accurate predictions, we can make clear comment on outlooks based on the information we have; so, at the moment, peak demand is indeed a valid theory. And I’d like to finish with what the International Energy Agency said at the launch of its Medium Term Oil Market Report, “this is most definitely not your father’s oil market.”


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