Peak oil may have arrived in the developed world - but for the consumption of crude, rather than its production.
The recession has crushed demand across the globe, the Organization of Petroleum Exporting Countries said yesterday. It does not expect demand for production to return to pre-recession levels until 2013.
Consumption in the developed world will remain stagnant for many years to come, OPEC said, even as many economists believe the wealthy world's seemingly insatiable demand for oil may well have peaked permanently.
The weaker-than-expected demand should help keep a lid on crude prices, and could undermine the viability of some oil sands projects, said energy economist Peter Tertzakian, of Calgary-based ARC Financial Corp.
He expects prices to remain between $60 (U.S.) a barrel and $100 for the foreseeable future, as any substantial increase in price would put more downward pressure on demand.
"That [price]will be enough for some oil sands projects, but not all the ones being touted just a year ago," Mr. Tertzakian said.
Many oil sands producers, however, remain confident that, in the longer term, prices will justify continued investment.
Chris Bloomer, chief operating officer at Petrobank Energy and Resources Ltd., said the drop in oil exploration spending is severe enough that falling supply will likely soon outpace suppressed demand.
"Globally, there's going to be an underinvestment in development for the near-term, for sure," he said. "With the decline rates on existing production of, say, 7 to 9 per cent a year, you've got to replace millions of barrels of oil production a year. And if you're underinvesting, the supply curve is going to cross over with the demand curve fairly soon."
Indeed, OPEC said in its annual World Oil Outlook that its members would be scaling back investment further because they already have considerable spare capacity, estimated at seven million barrels a day.
While the developed world has focused on supply concerns, the cartel has long warned about "security of demand," particularly as the United States and Europe adopted policies to reduce consumption through better fuel efficiency for automobiles and increased biofuel production.
In 2008, the world consumed 85.6 million barrels a day of crude, with OPEC supplying 31 million barrels.
By 2013, global demand should reach 87.9 million barrels but OPEC's share of the market is expected to slip as it reins in production to keep prices from collapsing.
For the developed world, crude consumption peaked at 47.5 million barrels a day in 2008 and is expected to fall to 45.5 million barrels next year. By 2030, it forecasts that demand in Organization for Economic Co-operation and Development countries will be 43.4 million barrels a day.
The combination of weaker economic growth, little increase in population and environmental concerns are combining to keep a lid on oil use in Europe, North America, Japan and South Korea.
Mr. Tertzakian cited another trend, "virtualization," where people turn to video-conferencing and Internet communications rather than the expense and hassle of business travel or long commutes.
"I believe that oil demand has peaked in the wealthy world, and even when the economy recovers on this side of the world, it is not a given oil demand is going to recover," the Calgary economist said.
OPEC said rising demand in developing countries will eventually drive growth in the overall global crude market.
"We have this recession and the financial crisis going on so this has really affected demand," OPEC secretary-general Abdullah al-Badri told a news conference in Vienna.
With files from reporter Nathan Vanderklippe in Calgary and Reuters