Could 3-D printers hasten peak oil demand? - Fuel for Thought

A global transition away from oil and gas is well underway as booming renewable energy sources and electric cars portend major changes for the industry.

Last week BP outlined the challenges ahead, but the company’s crystal ball has yet to focus on the disruptive potential from what may be the biggest paradigm shift in manufacturing since the advent of the factory.

Speaking at the launch of its annual long-term forecast, BP’s chief economist said the oil major is planning to grapple with the energy demand implications of the digital economy’s fast-growing upstart, 3-D printing. Also known as additive manufacturing, most technology watchers predict that the applications found for 3-D printing will only accelerate as networked automation, robotics, and Big Data become more pervasive.

“One of the things I think could really be transformative is additive manufacturing — artificial intelligence, 3-D printing and so on,” BP’s Dale Spencer said presenting BP’s energy outlook.

“Suppose additive manufacturing really took off, so we do 3D printing of more and more things. The whole nature of trade, the whole nature of supply chain, changes fundamentally. I do not need to ship goods from one part of the world to another, I print it.”

Indeed, the demand stakes of a slower than expected growth in road and maritime freight are significant. Over 90% of international bunker fuel use is dedicated to maritime freight and, added to road and air haulage, freight transportation accounts for over a quarter of global oil consumption, according to the IEA.

Forecasts for the growth of the 3-D printing are also bullish as technology improves. McKinsey in 2013 projected the market could explode from $5.2 billion to anywhere from $180 to $490 billion by 2025.

Others are more conservative but still bullish. Last year Wohler Associates, an additive manufacturing consultancy, estimated the market will quadruple to reach $21 billion by 2020, up from $5.2 billion in 2015.

But there are still many caveats over how 3-D printing could hit demand for oil.

While 3-D printing could disrupt traditional oil-powered supply chains, the manufacturing process itself is more energy intensive due mainly to longer production times and the peripheral devices needed to build up materials layer by layer.

According to one comparative study published in 2014, the energy consumption of additive manufacturing is estimated to be 100-fold higher than that of conventional bulk-forming processes, such as injection molding. Printing does save on materials but for most applications, their energy footprint offsets this benefit.

Demand destruction or new demand center?

A mitigating factor, however, would be the lifetime energy savings from more complex but lighter printed parts, for example, in the aerospace industry.

While some supply chains could become smaller and simpler, others may become larger and more complex. Local deliveries of made-to-order printed products to multiple end users would likely rise, made possible by more provincial production of goods.

The impact on oil companies may also be allayed as, even if 3-D printing takes off, the raw materials needed to print still need to be produced and transported traditionally.

After all, increasing volumes of crude will still go to fuel petrochemicals and feed the world’s appetite for plastics. The energy inputs needed to power printers and more digital tech will also still likely come from natural gas, a key earnings driver which many oil companies are rightly now paying more heed.

While acknowledging the demand destruction ahead, BP’s report assumes that global oil demand could actually peak later than some recent market watchers think.

Baseline estimates under BP’s outlook are for oil demand to start falling during the mid-2040’s after hitting 106 million b/d in 2035, up from 93 million b/d in 2016.

The figures make BP more bullish over oil demand than the International Energy Agency which in November predicted oil consumption would almost flat line by 2040 when it reaches 103.5 million b/d.

They also put the oil major at odds with a increasingly emerging view that oil demand could peak within the next 10-20 years. Admittedly, most of the alarming predictions are based on a sharp and radical switch to low carbon fuels needed to implement the Paris Accord on limiting climate change.

But with US President Trump now talking of leaving the Paris Accord, it may be innovations in the manufacturing sector that lead the way to lower carbon future.