Peak demand and oil's long-term trap
Fixating on the timing of a peak in oil demand is misplaced. Rather, the peak's significance is in shifting the paradigm, from perceived scarcity to perceived abundance. And it poses a problem for low-cost producers
The economic response would be to increase their output to capture value while they still could, pressing the advantage of cheaply extracted oil. But oil also carries a social cost in these countries. And the long-term oil price will therefore reflect not their marginal cost but the social one. That's the subtle argument of a new paper from the Oxford Institute for Energy Studies, written by Spencer Dale, BP's chief economist, and Bassam Fattouh, the institute's director. It's a compelling read. The notion of peak oil demand has been ubiquitous in the energy world's discourse over the past couple of years. The idea has lingered on during 2017, even as demand soared. If the oil-price rise of
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