In modern times demand is never created by oil companies but merely satisfied by them

Dilemma over new North Sea projects” reports The Times today. Not for the first time, though, there is an underlying but false assumption that oil consumption is supply rather than demand driven. It isn’t.

Oil/Gas production responds to consumer demand, it does not create it

I spent forty years with Shell and have received a Shell pension for nearly twenty. This may not make me objective, but it does make me informed ! In my early years we had three options for increasing sales. The first was to respond to market growth caused by lifestyle changes. The second was actively to seek to convert users of one form of energy (usually coal) to oil. The third was to gain business from our oil company competitors. Let’s see how this has changed.

Market growth. There is a correlation between economic growth and oil demand. As countries get richer they use more oil. To focus on countries like China makes sense. That demand is not created by the oil companies it is supplied by them.

Conversion. In my youth I worked on initiatives like “Mrs 1970” which created the oil-fired central heating market. Coal burning in a grate gave way to an oil-fired boiler and radiators. Here we were certainly creating demand and new markets. This rarely, if ever, happens today.

Competition. To gain a customer from a competitor has no effect on the size of the market. The demand is not created, just supplied by a different company.

In modern times demand is never created by oil companies but merely supplied by them. If we don’t develop new oil fields it will have zero effect on demand because somebody else will. Oil consumption is entirely demand driven. If you want to reduce consumption focus on the users not the suppliers.

One thought on “In modern times demand is never created by oil companies but merely satisfied by them

  1. Agree. The way to reduce fossil fuel consumption is for the market to provide reasonable alternatives that actually work. Otherwise the majority of consumers will never change their habits. ANY consumer product is driven by demand not the supplier. It’s unreasonable to expect public companies with vast oil reserves and with a duty to shareholders to reduce their production whilst demand keeps on rising. Just as the drug smugglers will not stop their traffic because of a sudden attack of social responsibility. For subsistence farmers in Helmand province growing poppy ensures survival.
    Capitalism cannot exist without government regulation. Otherwise anarchy would prevail. It’s the responsibility of governments around the world to protect people from themselves and the planet.
    Leaving it to laissez-faire demand and supply has led to this state we all find ourselves in.
    Let us hope the Cop meeting soon in Glasgow actually achieves substance and awareness not just more hot air and lip service. Otherwise I believe we are done for.

    Liked by 1 person

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