The energy transition and the growing share of electrification of transportation will not lead to a fast decline in global oil demand—any drop in consumption will be very gradual, Argus analysts said at the Argus Crude forum during the IPWeek conference on Tuesday.
The trend of world oil demand will be a “tug of war” between increased efforts at green recovery and electrification in Europe, the United States, and China to some extent, versus growing oil demand amid strong economic growth in emerging economies, according to Euan Craik, global head of oil at Argus.
Argus expects global oil demand to be just below 100 million barrels per day (bpd) by 2040—roughly the level of consumption in the last ‘normal’ year before the pandemic, 2019.
“It is worth noting that this is really in line with the levels we just came from in 2019, so it will be a very slow decline in oil demand even as new forms of energy come on stream and account for more of the pool,” Argus’ Craik said at the forum.
OPEC, for example, also sees demand growing in the next nearly two decades. OPEC expects global oil demand will exceed the pre-pandemic levels in 2022 and grow steadily until the late 2030s, when it will begin to plateau, the cartel said in October 2020, in a major shift in its forecast that put a timeline to peak oil demand. Related: U.S. Shale’s Struggles Will Be Help OPEC Stabilize Oil Prices
IHS Markit estimates that global oil demand for gasoline and diesel from light-duty vehicles peaked in 2019 at 29.1 million bpd. However, oil will still be the dominant energy source for transportation for years to come due to the sheer size of the global car fleet and the amount of time it takes for it to turn over, according to IHS Markit. The analysts estimate that electricity use in road transportation had only displaced about 370,000 bpd of oil demand—0.4 percent of world oil consumption—by 2020. This will rise to 1.5 million bpd by 2025.
“Increased electrification, along with rising fuel economy and emissions standards, will play an important role in the plateau and then decline of world oil demand that IHS Markit expects to emerge at some point over the next 10-15 years in its base case outlook,” it said last week.
By Tsvetana Paraskova for Oilprice.com
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