The idea of peak oil demand percolates periodically. The International Energy Agency was the most recent to opine on a peak in oil consumption. Is there an oil peak in our immediate future?
The answer is important for the oil industry and its service companies, especially offshore ones as their domain holds the future giant reserve discoveries necessary to keep the world’s energy supply on track.
The IEA sees a peak by 2030. The peak will be driven by “increased use of EVs, emerging clean energy technologies and more expansive efficiency policies.”
Last week, bp unveiled its 2024 Energy Outlook. It also sees demand peaking in the foreseeable future.
“In current trajectory, oil consumption gradually declines over the second half of the outlook to around 75 Mb/d in 2050,” the report said.
bp sees oil’s share of primary energy demand going from 32% to 23% between 2022 and 2050. Importantly, fossil fuels — oil, gas, and coal — will still provide two-thirds of primary energy in 2050 after consumption grows 7% over the forecast period.
OPEC’s July report reiterated its strong 2024 and 2025 oil demand growth forecasts driven by summer travel and sustained economic growth. With oil use climbing by 2.2 million barrels a day in 2024 and another 1.85 million barrels in 2025, the world will need new supplies. Remember, it is not just consumption growth new resources will satisfy, it is also the need to offset the productivity decline in existing well output.
Last month, investment banker Goldman Sachs issued a report titled “Peak oil demand is still a decade away.” Goldman Sachs contrasted its view with other “prominent forecasters” calling for a peak by 2030 in oil demand. The firm sees a 2035 peak driven by continued consumption growth in Asia’s emerging markets and petrochemical demand. The latter use of oil is often ignored by forecasters. They focus almost exclusively on road use of oil, which they see as being negatively impacted by the increasing number of EVs in the world’s vehicle fleet.
Goldman’s post-peak observation is important. “…after the decade it takes to peak, it plateaus, rather than sharply declines, for another few years.”
This view is sharply different from the IEA’s view.
Attempting to predict a peak in future oil demand is a fool’s errand, just as it was in the past. We are destined to have two billion more people on the planet by 2080. Those future arrivals will join the billions of people living today with little or no access to energy. Those people want an improved living standard, meaning it will take more primary energy.
Oil is critical for improving people’s everyday lives. It helps with the growing, processing, and delivery of food. It helps provide clean water, clothing, medicines, plastics, and travel, for example. These needs will drive oil’s use and the need for more supplies. Offshore service companies will be important in meeting this demand growth as the offshore remains the least explored area of the world.
