The joke doing the rounds is that at the current $27 to a barrel prices, oil is cheaper than mineral water, of the same volume. Your hydrating need is far more expensive than running your car, they say. The utopian innovation need of converting water to fuel needs to be reversed.

Ask any energy watcher and you are bound to hear one or all of the reasons to this price nosedive as OPEC’s production glut, slowing global demand and the US’ geopolitical softening towards certain regimes. Are these really reasons, or resultant actions of other factors? Let’s understand energy demand — Why has energy demand consistently gone up in the last decade?

Three of the five key reasons — the US’ inexhaustible energy demand, harsher and longer winters globally leading to increased heating/fuel needs and economic upsides in other major energy guzzlers (read China and Europe).

For the first reason, innovations in the US’ extraction techniques have been the disruptor.

Between 2010 and 2014, global economies were recovering from the financial crisis and conflict in Libya and Iraq was restricting oil supply. Chinese demand and energy supply uncertainty as factors were high and oil prices soared to $100 per barrel.

And then, the most obvious economic principle came to be “When stressed for resources, man innovates”. The high oil prices got drillers in the US to use innovative hydraulic fracturing techniques to unlock vast oil quantities from shale formations. The US crude oil production doubled from the 2010 levels. (The US today imports just 30 per cent of its crude oil needs, as against a high of 60 per cent in 2005)

And then there is the trend of gradually warming winters, and reducing residential consumption. An unusually delayed winter this time, across the Northern Hemisphere has had its share to consumption reduction.

Global climate drivers are the PDO (Pacific Decadal Oscillation), ENSO (El Nino Southern Oscillation), and the AMO (Atlantic Multi decadal Oscillation).Certain phases and combinations of these ocean oscillations have been known to cause significant changes to weather all over the world.

The combination this time is a warmer or delayed winter. (Quoting a paper on the correlation between temperature and oil usage by the Kiel Institute, in the short run, if temperature increases by one degree Fahrenheit, per-capita oil consumption decreases by 1 per cent)

Oil supply today is higher than demand by more than 1.5 million barrels per day (MBD), and the excess is getting saved in stockpiles.

The writer heads new country development at Marico. The views are personal

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