The Fuse

Crosspost: Oil Dependency Grows with Falling Price

by Peter Tertzakian | June 21, 2017

This article was originally published on ARC Energy Research Institute’s website.

Headlines around electric cars and carbon policy suggest our oil dependency is on a slippery downward slope. Recent data from 2016 suggests the opposite: our worldwide addiction is getting stronger.

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Oil consumption versus economic activity (GDP) measures the energy “intensity” or “dependency” of our lifestyles to the wonder-fuel we love to hate. A steepening upward slope implies greater dependency and vice versa.

Headlines around electric cars and carbon policy suggest our oil dependency is on a slippery downward slope. Recent data from 2016 suggests the opposite: our worldwide addiction is getting stronger.

Before 2000, it took about 550 b/d to lubricate a change of $US 1 billion of global GDP growth. Higher oil prices from ’02 to ’13 lessened our dependency to 240 b/d through efficiency and substitution. Post the 2014 price crash, we’re back up to guzzling 360 b/d for every extra billion dollars of petroleum-fueled economy.

Gasoline demand is up, because people are driving more kilometers. And 50 million new petroleum vehicles (net of retirements) are hitting the road per year; over 30 million in Asia alone. Petrochemical demand is solidly correlated with economic activity.

Why are we surprised? When a product gets cheaper, people use more.

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