BP's Magic Curve  

Andrew McKillop has an interesting analysis of BP's oil demand predictions.

In its ceaseless quest to present world supply-demand trends and factors as favouring Cheap Oil, BP Amoco and other consumer nation ‘players’ in the world oil market, formerly nicknamed the ‘Seven Sisters’ but now shrunk to 5 Anxious Dwarfs, necessarily has to provide apparent logic for this quest.

On the supply side, oil consumer nation agencies such as the OECD’s IEA and the US EIA, latterly joined by OPEC and Russian oil sector forecasting institutions, present ‘potential major increase’ in world oil supply as being feasible and likely, at least through 2005-06.

This has enabled some analysts to claim there can be a return to ‘structural oversupply’ as in the 1986-99 ‘cheap oil interval’, with recurring, if weakly credible supporting claims of ‘OPEC overproduction’.

The underlying rationale is that world oil supply will always tend to increase faster than world oil demand, and that the OPEC group will always have unused production capacity.

On the demand side, to lend credibility to this fundamentally impossible situation (see below), BP Amoco has created what can be called its ‘Magic Curve’. This purports to show that world oil demand growth is always trending downwards. Over the 10 years 1994-2004, for example, the curve produced by researchers inside BP Amoco shows that world oil demand growth would shrink by about 65%. Complete zero growth of world oil demand would be attained in about the year 2007.

This can be called an absurd and preposterous fantasy.

It could also be called a belief in magic -- or a way to admit the certainty of Peak Oil without saying it out loud !