When will oil peak? That’s anyone’s guess
Predicting when the world’s demand for oil will begin to decline has become a parlor game with no clear winner.
Goldman Sachs last week became the latest forecaster saying that demand will peak sooner than expected.
The bank brought forward its forecast for peak oil demand in the transportation sector by one year to 2026, if not sooner, largely due to the accelerating adoption of electric vehicles. Overall crude consumption will keep expanding this decade due to jet fuel and petrochemicals, but growth will be at an “anemic” pace past 2025.
Goldman is the latest to reevaluate what the end of demand growth will look like for oil. Among the most aggressive calls is that from BP, which said last year that the era of oil demand growth may already be over, while the International Energy Agency has taken a more conservative view than BP, seeing demand plateau from around 2030.
The economic fallout from the COVID-19 pandemic suppressed oil demand to such a degree that some energy analysts believe it has altered the demand curve for oil.
Rystad Energy, an independent research firm in Norway, predicts that oil demand will now peak at 102 million barrels per day in 2028, two years earlier than they predicted before the virus struck.
“The slow recovery will permanently affect global oil demand levels,” said Artyom Tchen, senior oil markets analyst at Rystad. “The lockdowns will stunt economic recovery in the short-term and in the longterm and the pandemic will also leave behind a legacy of behavioral changes that will also affect oil use.”
Pulitzer Prize-winning author Daniel Yergin, vice chairman of global energy research firm IHS Markit, offered his prediction in October, based on the recovery from the pandemic:
“So much goes back to what is the nature of the economy in the next several years after this crisis. Is growth renewed, or is growth feeble? I think oil demand will continue to grow. Technology around electric vehicles, batteries and renewable energy could change, but I take the view that it’s probably in the first half of the 2030s that we really start to flatten out and begin a decline. Obviously, some people now think it’s going to be a decade sooner than that.”
The guessing game has gone on for years with the dates of some predictions having come and gone.
A 2017 study by the Grantham Institute, part of the Imperial College of London, suggested that major energy companies underestimated the coming growth of renewable energy sources and electric vehicles. The researchers said the costs of these technologies would plummet, making them more competitive and quickly driving down demand for fossil fuels.
The study predicted peak oil would arrive by 2020.
Meanwhile, some oil companies have used predictions of their own peak oil production to advance the transition to cleaner fuels.
In February, European major Royal Dutch Shell said its oil production peaked in 2019 and laid out a plan to transform its fossil fuels business into a cleanenergy provider.
“Oil companies used to fear peak oil supply and focused on their growth prospects,” said said Mark Finley, an energy economist with Rice University’s Baker Institute for Public Policy. “Now, these companies are bragging about their own peak oil supply.”