"a glut of oil on the supply side of things "
A dearth of demand..
A Surprising Look at Oil Consumption
by Ron Patterson Posted on 11/24/2015
The EIA publishes oil consumption numbers for all major nations. However they have data for most nations only through 2013. They do have data for some nations through 2014. Nevertheless a lot can be gleaned from just looking at those consumption numbers. If oil consumption numbers are growing year after year, then there is a good chance that nation is growing economically. But if oil consumption numbers are continually declining year after year, then it is more than a little silly to say all is well, economically, with that nation. Or that is my opinion anyway.
First, who’s oil consumption is increasing year after year, or who’s economy is booming? All charts below are consumption as total liquids in thousand barrels per day. Some charts are through 2014 while others are through 2013. Whatever the last year is on the yearly axis is the last year for that data.
Important: All charts are consumption, not production.
Consumption peaked for Europe in 2005 and 2006. The largest drop was in 2009. For Europe we only have data through 2013. Europe’s oil consumption is down 13 percent, 2006 to 2013.
US held peak oil consumption at around 20,700,000 barrels per day from 2004 through 2007, dropped in 2008 and 2009 but has leveled out since then. US consumption in 2004 stood at just over 19 million barrels per day, down about 8 percent since the four year peak period. The recession has not hit the US nearly as hard as it has hit Europe
And last but not least, China has peaked, or so says the Japanese financial holding company Nomura. This chart is China oil production, past and predicted.
No turning back for China’s oil production
China’s domestic oil production likely peaked this year and is about to enter a long-term structural decline, according to Nomura. It notes the experience from Alaska’s Prudhoe Bay, which peaked in 1988: “Once the steep stage of the terminal decline output phase begins, there is generally no turning back.” The takeaway is that China could be a buyer on global energy markets next year, importing bigger volumes as it seeks to offset waning domestic production. Nomura says demand from China should help offset new supply from Iran, with prices stabilising at an average US$55 per barrel next year.
My comment: The recent decline in oil prices had at least as much to do with falling consumption as it did rising production. We don’t yet have consumption numbers for 2015 yet but from the build in inventories it does not look like that consumption has improved significantly.
With China’s economic growth slowing it looks like world oil consumption will get worse before it gets better. This is one reason I expect oil prices to stay low for quite a while longer.
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