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The other side of the peak: Italy's collapse of oil and gas consumption

Italy' peak oil has arrived: we are back to 1967 in terms of oil consumption.  
All the data in this post are from BP statistical review up to 2012, updated to 2013 from various sources.


Sometimes, peak oil looks like an intellectual game that people keep playing by arguing whether it has arrived or not. But the point with oil is not how much of it is produced, somewhere, but how much you can afford to use. And, for Italy, the peak of consumption has already arrived, as you can see in the figure above. It is impressive: consumption went down of more than 30% in less than 10 years. Today we are back to the levels of 1967. And, in 1967, Italy's population was around 50 million people, some ten million less than today. We really have reached the other side of the peak and we don't see the bottom of the descent. 

So, why that? Simple: the reduction in oil consumption is directly linked to oil prices, as you can see here:


If you like to plot prices versus production, here are the results:


In short, the Italian economy can afford to grow its oil consumption when oil costs less than about 20 dollars per barrel (in today's dollars), it remains stable as long as oil is at less than ca. 40 dollars per barrel and it collapses when oil prices go above that level.

I am sure that now you are wondering about how's life in Italy with one third of oil consumption gone. You would expect empty roads, deserted towns, and a general post-holocaust atmosphere. Well, no; that's not the case. I can tell you that it is hard to see big changes in everyday life in Italy. In particular, at rush hour in town, the streets look jammed with cars as ever. From what I hear from friends and acquaintances, the situation is the same for all large towns in Italy.

But arriving to the conclusion that there are no problems in Italy would mean to make the same mistake that our former prime minister made a few years ago, when he said that Italy had no economic problems because "restaurants are full". Restaurants are not the economy and city streets at rush hour are not the country's transportation system. And there is no doubt that transportation is in trouble if we measure it in terms of km traveled. Here are the data (courtesy of Massimo de Carlo at "Mondo Elettrico"). The blue curve is for light vehicles, mainly cars, violet is for trucks, and red is all vehicles. Data from AISCAT, updated to 2012.


We see that the transportation system managed to cope - more or less - with the reduced oil supply until about 2008-2010. The peak in km traveled came later than the peak in oil consumption and the decline has been less pronounced: less than 10% for cars and about 15% for trucks. So, it makes sense that the loss of traffic is not clearly noticeable in towns, especially during rush hours. People have probably cut the non strictly necessary travels and it seems that they are still able to use their cars for everyday transportation. They could do that in large part by switching their cars to natural gas and liquefied petroleum gas as fuels. In part also by switching to more efficient cars, although small and hybrid cars in Italy seem to be vastly outnumbered by SUVs. 

So, it seems that the main factor in counteracting the decline in oil consumption, up to a certain point, has been an increase in natural gas consumption. That has been a historical trend not just in terms of vehicle fuels, but for a variety of applications. You can see the story in the following figure:

  

Around 2006, gas consumption peaked and generated "peak hydrocarbons" in Italy. Afterward, consumption has been rapidly declining; much faster than growth. It is a behavior that I termed the "Seneca Collapse". Italy may have the dubious honor of being the first major Western economy to experience this kind of collapse in modern times. 

So, what's going to happen, now, on this side of the peak? Difficult to say, but if the Seneca collapse continues, in the coming years it is unlikely that we'll be still seeing traffic jams at rush hour (and restaurants full of people). 

Fiat teaser image via disaster_area/flickr. Creative Commons 2.0 license.

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