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The Other Peak Oil: Demand from Developed World Falling

Oil demand in industrialized countries peaked in 2005 and will not reach that high again, a new report predicts
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WIKIMEDIA COMMONS/FLCELLOGUY

Demand for oil in developed nations peaked in 2005, and changing demographics and improved motor-vehicle efficiency guarantee that it won't hit those heights again, IHS Cambridge Energy Research Associates says in a new report.

Reduced petroleum demand in developed nations could make their economic growth less vulnerable to oil price shocks, the report states.

Nonetheless, global oil demand is still expected to grow, overall, driven by China and other developing nations as the world economy recovers.

But demand for oil that has fallen in recent years in Organisation for Economic Co-operation and Development, or OECD, nations won't be made up, the analysts say.

"The economic downturn has been masking a larger trend in the oil demand of developed countries," said Daniel Yergin, the company's chairman. "The fact is that OECD oil demand has been falling since late 2005, well before the Great Recession began."

The biggest reason, the group says, is that oil demand in the transportation sector -- which is the United States' dominant use of oil and accounts for 60 percent of OECD petroleum demand -- is flattening.

The trend has been noticed elsewhere, as well. Exxon Mobil Corp. CEO Rex Tillerson said this month that U.S. gasoline demand peaked in 2007.

The Cambridge Energy Research Associates, or CERA, analysis cites several reasons why demand in developed nations -- which accounts for slightly more than half the world's total -- won't recover. Among them: Car ownership rates have reached "saturation," while populations are aging and population growth ranges from low to negative.

Also, OECD governments, driven by global warming and energy security worries, have tightened fuel efficiency standards, while high prices in recent years have also pushed consumers away from gas guzzlers.

In the United States, the Obama administration plans to implement rules that push corporate average fuel economy, or CAFE, standards to a fleetwide average of 35.5 miles per gallon by 2016, four years ahead of the schedule Congress laid out in a 2007 energy law.

Use of alternative fuels like ethanol has also grown.

"New technologies such as plug-in hybrid electric vehicles and next-generation biofuels could also have a greater impact in the future," the report states.

Global demand will nonetheless grow, fueled mostly by developing nations, CERA finds. The company forecasts world demand to increase from 83.8 million barrels per day this year to 89.1 mbd in 2014.

"Just 900,000 bpd [barrels per day] of growth is expected to come from OECD countries, just a fraction of the 3.7 million bpd of demand lost over the course of 2005 to 2009," the report states.

But CERA cautions that developed nations will hardly be through with oil anytime soon. The demand reduction in OECD countries between the 2005 peak and 2030 is expected to be "fairly modest," it states.

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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