Right for the Wrong Reasons

12 min readSep 11


No. This is not sustainable, either. Photo by Jenny Ueberberg on Unsplash

We are continue to be misled by mainstream media, oil companies and their advisors alike up to a point of self-delusion. Not only when it comes to climate change and its causes, but about matters of peak supply and demand as well. The message is clear: there can be no doubt that we will prevail as a high-tech society forever — with or without fossil fuels. This notion, however, is driven by ignorance and blind optimism. What we are facing is neither peak demand nor peak supply but a collapse in energy use, something completely unseen by most commentators. Might it be, despite all this, that forecasts made by advocates of peak oil demand will prove to be right in the end…?

According to a widely shared misbelief among industry “experts” and economic pundits alike, an increasing share of electric vehicles (EVs) will reduce overall oil demand worldwide, eventually degrading it to zero in a couple of decades. It’s high time that we educate ourselves in the topic and start to look at oil production and consumption as a whole, not focusing solely on aspects close to our hearts (1). So, where do we begin? I collected some basic points completely missing from the discussions on the topic, so that you can decide for yourself whether to place your bet on peak demand occurring soon.

The process of distilling Crude Oil. Source
  1. Anyone interested in the subject of refining oil at least a little knows that petroleum is not magic fairy dust. You cannot wish away parts of it, or conjure up stuff from it at will. It has a certain chemical composition ranging from light substances used in plastics production through gasoline, diesel, jet fuel, heavy fuel oil, lubricants and finally to asphalt. While decomposing heavier substances (found lower down the list above) is technically possible with a lot of energy and additional hydrogen inputs (usually both coming from natural gas), fusing lighter components into heavier ones is practically impossible (you can do it in a lab, but never at an economic scale due to large energy inputs and losses). In a nutshell: there is a certain ratio of gasoline to diesel (and other oil products) in any given barrel of oil, one which cannot be fiddled with too much.
  2. Electric vehicles replace gasoline use only. Diesel, used in long distance transport from trucks to locomotives and ships cannot be replaced neither by batteries nor hydrogen. (The same is true for jet fuel.) And while you can operate short distance transport (so called ‘milk runs’) on electric trucks — carrying a three ton battery pack and costing 5 times as much as a diesel vehicle — you cannot deliver anything beyond a couple hundred miles by using electricity only. Trucks and fuel are only half the cost of operating a freight vehicle, the other half is coming from the driver’s salary and insurance. Now, can you imagine running a successful freight forwarder business if you had to stop every two to three hours (or every 150 miles) to charge your truck for an hour and a half (even on a fast charger)? Well, I guess you start to see my point.
  3. The manufacturing of EVs take more minerals (nickel, cobalt, graphite, copper etc.) than their internal combustion engine counterparts. Since the mining and transportation of these minerals is done almost exclusively by diesel engines (which electric drive trains cannot replace due to the reasons above), the demand for diesel will actually increase with a wider adoption of electric vehicles. Knowing that the ratio of diesel and gasoline in any given barrel of oil is pretty much fixed, a rise in EV production volumes would thus give rise to oil demand, as paradoxical as it may sound.
  4. An increased demand on precious minerals will also inevitably lead to shortages and price spikes, not only in case of battery metals but diesel fuel as well. The higher demand climbs the costlier it will become to satisfy it. Long gone are the days of cheap fuel, and readily expandable mining production. What is left to dig up lies further and further away from civilization and comes in lower and lower concentrations. As a result (thanks to this direct feedback mechanism) raw material costs for EVs will rise even higher, putting an end to the fall of battery costs experienced in the past decades. Besides, did you ever wander if there is physically enough metal reserves to cover all this demand…?
  5. Besides an ever growing diesel demand, there are million other reasons why you cannot reduce oil production, even if you think that eventually all transportation can be electrified or all required metals could be magically conjured up in warehouses around the world. For starters, you will still need plastics to cover the interiors, make the seats, tires, cable insulation, then you will still need paint and lubricants (no, plant oil is not a substitute either); not to mention asphalt, a key ingredient to modern road pavement. (Unless you want to cover everything in concrete, but then you will run out of sand pretty quick). Let’s face it: oil has become an indispensable raw material in and of itself, besides being an integral part of modern transport technology. Doing away with one part of it (gasoline) does not solve anything. At all.
  6. Despite all this hurdles, let’s presume that the EV transition still succeeds somehow. (I hope there is a school somewhere training armies of magi mastering the art of conjuration to make that happen, though.) Now, the question poses itself: what should we do with all that surplus gasoline, displaced by EVs? Burn it…? But then why the fuss? Should we then pump it back underground, hoping that it will never leak and seep into the groundwater? (Trust me, it will.) In earlier times gasoline was an industrial byproduct of lamp oil refinement, and was released into rivers and streams — so much so, that sometimes these waters caught fire. Carl Benz’s invention has actually found a “solution” to this burning environmental issue by combusting this dangerous pollutant in personal vehicles. (And thereby contributing to climate change… as it is often the case with “solutions” creating more and bigger “problems” than what they solve; but that’s another story.)
  7. The answer to the question posed above comes from economic theory itself. William Stanley Jevons famously stated in the 19th century already, that by using a resource more efficiently you actually increase the consumption of it. He has made this observation with coal: by designing more efficient steam engines, engineers actually made those machines more affordable for a wide range of businesses. High fuel consumption were no longer a deterrent, and thus more and more entrepreneurs decided to buy one of these hissing machines, more travelers choose the train as ticket prices started to fall, and more ships were converted to use this fuel. The end result: more coal consumption than ever. All things being equal, the same can be expected with an ever wider adoption of electric vehicles. Since refineries are working with a more or less fixed ratio between products, in case of an EV boom gasoline would suddenly be in oversupply. As soon as the price of fuel, a substance traded worldwide, would start to fall in tandem with falling demand in the well-to-do regions of the world, so would more and more people in Africa, Latin America and Asia be able to afford a car or upgrade from a bicycle to a motorbike. Remember: internal combustion engines will be always cheaper to manufacture than electric drivetrains, so combined with cheap gasoline they will become the obvious choice for many. All what an even wider adoption of EVs in the richer part of the world would thus do, is to bring about additional demand for gasoline elsewhere, leading to the burning of all available supply to the very last drop.
  8. Electric vehicles do not operate on thin air neither. They would need a massive ramp up in charging stations and electric networks. In 2022, about 134.5 billion gallons of finished motor gasoline were consumed in the United States. Translating this into EV charging demand this would mean a whopping 1024 Terawatts of electricity (2) requiring a 25% increase in power supplied to the grid. And it does not only mean a quarter more supply, but 25% more transmission lines, giant transformers, switchgear, everything. Since renewables alone cannot cover that increase (due to intermittency) more natural gas fired power plants would need to be added as well. All this additional equipment would have to be paid for, of course, by the end user. Who else? Elon Musk? It is thus safe to assume that electricity prices would increase significantly as a result, while at the same time gasoline prices would be falling. If anything, this alone would be enough to act as a negative feedback on EV adoption.
A not so green aspect of electric vehicles. Photo by Dominik Vanyi on Unsplash

Based on understanding all this, we are not headed towards an all electric utopia, but an unstable equilibrium between EVs and gasoline cars. Electric vehicles sales will slowly settle around a certain percentage of total vehicle sales, as this technology too reaches a point of diminishing returns. A certain market penetration, above which the costs of expanding the grid, adding new charging infrastructure, opening new mines to cover increased metal demand, burning more natural gas to increase electricity supply etc. exceed the net benefits provided by EVs — stymieing further growth in sales. On the balancing side gasoline will get cheaper, encouraging people to drive more traditional vehicles.

As an ominous sign of all this, and that car manufacturers might have become a tad bit overexcited about EVs (thanks to generous government subsidies) the supply of electric vehicles now significantly outstrips sales. Dealers are now sitting on an increasing stock of hard to sell cars waiting to be charged. In the meantime US consumer gasoline demand ticks up, while demand for diesel slumps. For me, these are not quite the tell tale signs of a successful EV transition. Rather, that despite all the happy talk, subsidies and “inflation reduction acts”, the green economy is not even close to doing fine, let alone being on a cusp of a “revolution”. Again, if electrification made economic sense beyond a few niche areas, no subsidies would be needed and we would see an uptick in resource and energy use as the transformation unfolds. None of that is the case right now.

The reason is, as always, false assumptions. All the prior optimism about EVs were based on an ideal world, where all of our raw material and oil demands could be met during the transition. The reality is, that US oil production will peak before the end of the decade, and other oil producing nations will start to ration exports to save fuel for their consumption. Oil keeps getting more and more energy intensive to get as cheap to produce traditional reserves give way to more complex and expensive to get ones. In order not to run themselves into bankruptcy by extracting these increasingly expensive oil deposits at a relatively low selling price, state owned companies (like Saudi Aramco) are rather curtailing production and exports (3).

As I and others like Gail Tverberg keep telling: oil has slowly become too costly for producers to get, at the same time when consumers simply could not pay more. Since the price of oil builds into every single product we buy, expensive oil simply stymies consumption through products and services. It also curtails its own production through drilling equipment inflation and workers demanding higher pay — as a compensation for rising food and energy prices — all ultimately due to higher oil prices. If this sounds like a vicious cycle to you, then you are not entirely mistaken. Energy is the economy, and if it takes more and more energy to get the same amount of energy, it is only a question of time when this whole mess explodes into our face. Welcome to the big mad energy scramble, eventually leading to a collapse in energy use. Everywhere.

The oil industry is already in its ‘death knell phase’ marked by a slow motion collapse in traditional oil exploration and extraction. Not because EVs are eating up oil demand — that is technically impossible as we have seen — but because new reserves take more and more energy and resources to tap into, and require more investment than ever in history. The slow agony of this once profitable industry inevitably has led to bottlenecks in supply, now leading to price spikes followed by steep falls. In this environment, made worse by ever higher interest rates, monetary returns on investments slowly become impossible to plan, and only the most secure projects will be executed. Since the reasons can be found in geology and physics, throwing more money at it will help only temporarily. As the situation worsens year by year, leading to a dearth of new supply coming online, the natural decline of old traditional wells will never be fully compensated. Oil supply as a result will start to fall, notwithstanding oil companies still having a ton of proven reserves on paper, lasting another half a century (theoretically).

A coming oil supply squeeze due to this global energy crisis might just prove Tony Seba — an advocate for peak oil demand, and one of the co-founders of RethinkX — to be right, but for the wrong reasons of course. It would be not at all inconceivable after all, that in a deteriorating energy situation people would rather sell their vehicles and opt for transportation as a service (TAAS i.e.: car sharing) instead. And as Seba predicts we very well might see:

  • TAAS will be making up 60 per cent of U.S vehicle stock (you will own nothing and will be happy)
  • The number of passenger vehicles on American roads will drop from 247 million in 2020 to 44 million in 2030
  • As a result 70 percent fewer passenger cars and trucks will be manufactured each year, global automaker supply chains will shrink to a fraction of their current size, throwing millions out of work, with ripple effects throughout national economies.

Welcome to the economic collapse of the once mighty West. BMW is already ringing the alarm bell. (The Eastern hemisphere will hold on for a while, but after a decade or two they too will succumb to the reality of resource and energy depletion.) For sure, car sharing will help mitigate the negative effects of our global energy decline somewhat, until the predicament we have found ourselves in starts to really bite into material extraction and manufacturing. We are facing a massive transport fuel deficit, no nuclear, fusion or “renewable” sources can compensate. As the surplus energy from liquid fuels vanishes in the rear view mirror, their use will be increasingly limited to essentials (i.e. war and agriculture), putting an end to the fantasy of electrifying the Titanic as it slowly sinks into the Atlantic.

Until next time,



(1) I’m no petroleum geologist, but I read and listened to enough of those who are to insert my quibbles here. By the way, most neoclassical economists spreading this theory are no scientists either, so at least in this regard we are on equal footing. With that said, the level of ignorance on display from peak demand theorists and techno-optimists is so glaring that they must be called out and questioned, no matter what.

(2) Average fuel economy in 2021 was 25.4 mpg for new cars. Since there are older vehicles on the road as well (with much worse mpg-s) we can calculate with an average 22 miles covered per gallon consumed. Thus the 134.55 billion gallons consumed in 2022 translates to 2960 billion miles driven. Now, an average EV travels a mile by consuming 315 Wh of electricity (196 Wh/km). Calculating with an average 10% charging loss this goes up to 346 Wh/mile. So, you would need to draw a whopping 1 024 194 billion Wh (or Gigawatts) of electricity from the grid to replace all gasoline use with electricity (that is 1024 Terawatts or 1 Petawatt). For comparison, the US has consumed 4050 TW (4 trillion kwh) of electricity in 2022. Converting to all electric vehicles would thus increase demand by a quarter of that.

(3) Meanwhile, as a direct result of Saudi production cuts and sanctions, refining margins are on the rise in Europe due to a lack of suitable (medium heavy) oil to derive middle distillates (diesel and jet fuel) from. In this case increased US shale output is no panacea either, as it yields mostly light distillates. Europe has navigated itself into a blind alley and now cannot seem to find a way out of this mess.




A critic of modern times - offering ideas for honest contemplation. Also on Substack: https://thehonestsorcerer.substack.com/