Peak oil demand? Nobody knows
More importantly, said the OIES, there is little reason to believe that once it does peak, oil demand will fall sharply.
“The world is likely to demand large quantities of oil for many decades to come. Rather, the significance of peak oil is that it signals a shift in paradigm — from an age of (perceived) scarcity to an age of abundance — and with it is likely to herald a shift to a more competitive market environment.”
This change in paradigm is expected to pose material challenges for oil-producing economies as they try both to
“ ensure that their oil is produced and consumed, and at the same time diversify their economies.”
OIES said: “It seems likely that many low-cost producers will delay the pace at which they adopt a more competitive “higher volume, lower price” strategy until they reduce the “social costs” of oil production associated with using oil revenues to finance many other aspects of their economy, such as health-care provision or publicsector employment.
OIES added that it was unlikely that oil prices would stabilize around a level in which many of the world’s major oil-producing economies were running large and persistent fiscal deficits.
“As such, the average level of oil prices over the next few decades is likely to depend more on developments in the social cost of production across the major oil producing economies than on the physical cost of extraction,” said the OIES paper.