The recent price decline is expected to have only a marginal impact on global demand growth… Projections of oil-demand growth have been revised downwards, rather than upwards, since the price drop.
Oil demand is falling in rich nations because of ageing populations, improved city design, environmental rules, vehicle efficiency standards and structural shifts, such as the growth of online shopping. Fuel switching towards gas and electric vehicles are also a factor, the IEA says.
Emerging economies are more than offsetting demand reductions in rich nations, says the IEA. They will continue to do so, though the pace of growth will be slower than previously expected.
This phase will see oil demand continue to grow at 1.2 per cent per year to 2020, well below the near-two per cent rate of growth before the global financial crisis.
These shifts are particularly apparent in China, previously a key driver of increasing oil demand. The IEA says it has entered a new, less oil-intensive stage of development. Demand there is expected to grow at 2.6 per cent each year over the six years to 2020, roughly half the rate over the previous six years.
Electric cars are barely mentioned. Yet they are critical to how the picture is changing. At the moment (2014) they form just 0.5% of total car sales. But they are growing extremely fast. The growth rate is slowing a little from the hectic early days, but given (a) the plunge in battery prices and (b) the clear political will in all the main car producing and consuming countries to cut carbon emissions, the growth rate is unlikely to slide much below a doubling every 2 years (like solar). Which means that in 4 years (or before) EV sales will be 2% of total car sales. In six years 4%; in 8 years 8%; in 10 years 16%. They already exceed 1.5% in the US.
What this means is that in just 6 or so years, the rise in the percentage of EVs in the total car fleet will equal 50% of the growth in total oil demand. And that's without a carbon tax applied to petrol (gasoline) and diesel, which would cut oil sales, and would be a sensible move by governments seeking a relatively painless way to cut emissions. And in the next 2 year period all additional "demand" for oil will be satisfied by EVs, as the percentage rises towards 10%. (Assume a car life cycle of 6 years.)
Now the significance of this is that the world's largest oil producer, Saudi Arabia, not only is one of the lowest-cost producers globally but also has the longest reserves (30 years at current rates of production). In the past Saudi Arabia acted as a swing producer when the oil price collapsed. This time they haven't. And they won't, because they can see the writing on the wall. Oil demand, even without a recession, will soon peak. And Saudi Arabia can still sell oil profitably down to $20. Why not sell all you can while you can, if you are still making money? Especially if you can annoy the Russians and the Iranians and those uppity shale oil producers? And especially if you know that your market will disappear long before your oil runs out?
Of course, there will be a short-term and prolly not very big rebound in the oil price as shale oil production tails off. It's currently looking for a bottom, if I judge the technicals correctly. And the fall in the petrol price will perhaps cause a short term hit to the growth rate of electric cars sales, though ppl who buy electric cars aren't doing it because they're cheaper than petrol-driven cars but for all sorts of other reasons, In fact EVs will be as cheap as other cars in 5 or 6 years as battery costs plummet, not just initial outlay but also running costs (EVs require very little servicing) .
The Saudis have seen the future. And precisely because of EVs, their reaction to the obvious and inexorable shift to EVs s will prevent any big rise in oil prices. The real oil price has begun an secular descent as battery costs fall and both market and political forces drive the switch to clean energy.