Over the past few weeks, we've heard some Canadian politicians talk about oil consumption peaking and demand for the product decreasing over the next few years. The data that is available seems to tell a very different story. I want to be clear that we’re not bullish on the price of oil and are actually underweight in oil and gas equities in our models. However, trying to tell Canadians that oil consumption is going down seems nonsensical.

 

The demise of oil consumption has been in the forefront of many institutions over the last 10 years. Despite this, current global consumption is almost 105 million barrels of oil per day – more than any other time in history.

 

While it is true that oil consumption for some countries has decreased, many other countries have experienced enough growth to more-than offset this. As you can see from the chart below, only Japan and Europe have had a decline in consumption. However, the approximately 3-million-barrel decline of those two countries has been overshadowed by the increased consumption from India, China, and other Asian countries. Note that the slope of the curves of regions that are growing consumption is much steeper than any of the declining regions. This makes it very difficult to believe that we will reach peak consumption anytime soon.

 

So if the world continues to consume oil, why not get it from Canada? As you can see from our second chart below, the nations that consume the most oil don't produce enough to meet their needs. If China, India, and Japan have to import oil, they might as well buy from Canada as opposed to other countries that have excess production, like Saudi Arabia, Russia, Iraq, Iran, or the UEA. Regardless of your views on the environment, it appears that oil consumption will not flatten out for quite some time. There is no doubt that someday we will see the demand for oil reach a final peak and start to decline as solar, nuclear, and potentially other new energy sources make their way to the market. However, it is unlikely that we will see that in the next 15 or 20 years.

 

 

I have also attached some commentary from our CIBC Economics team entitled “Skate to where the puck is going to be”.

 

As always, if you have any questions, please feel free to give us a call.

 

Have a great weekend.

 

Milan