Global oil demand will reach its peak in the mid-2020s and plateau around 2030, the International Energy Agency said in its World Energy Outlook for 2019.
Until about 2025, the IEA said, global oil demand will expand by about 1 percent annually, exceeding 100 million bpd and reaching 105.4 million bpd. After that growth will shrink substantially and demand will reach a plateau at less than 110 million bpd-106.4 million bpd.
The bad news for the oil industry has a silver lining, however. According to IEA, natural depletion will shrink oil supply and lead to an increase in prices. These, the agency said, could average $90 a barrel in 2030 and $103 a barrel in 2040.
Of course, making such a long-term price prediction for oil is nothing but speculation given how many factors are at play in oil prices. Yet natural depletion and the need for new exploration have been highlighted before: in 2016, even before prices began to recover, Wood Mackenzie warned the world may swing into an oil shortage by 2035. The size of the shortage Wood Mac projected was 4.5 million bpd-about 5 percent of global consumption in 2016.
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Since then, reserve replacement has not gotten any better. According to Rystad Energy, only one in six barrels produced is being replaced in the year-to-date period. This is the lowest reserve replacement ratio in 20 years.
If demand is set for a plateau, this should not be too much of a problem, it seems. According to IEA, some 4 million bpd in global demand will be erased by the influx of electric cars that is looming over the world of transport. Another 9 million bpd will be eliminated by more fuel-efficient engines. That should be more than enough to make up for any potential shortages resulting from lower exploration.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
That are three major NOs which the IEA should take note of: NO post-oil era, NO peak oil demand either and NO imminent energy transition for the foreseeable future. I will explain why.
There will be no post-oil era throughout the 21st century and probably far beyond. The reason is that it is very doubtful that an alternative as versatile and practicable as oil, particularly in transport, could totally replace oil in the next 100 years and beyond. What will change is some aspects of the multi-uses of oil in electricity generation and water desalination which will eventually be mostly powered by solar energy. However, oil will continue to be used extensively in global transport, the petrochemical industry and other industries and outlets from pharmaceuticals to plastics, aviation and computers to agriculture which without oil it will not be able to feed 7.5 billion of people.
There will be no peak oil demand either. While an increasing number of electric vehicles (EVs) on the roads coupled with government environmental legislations could slowly decelerate the demand for oil, EVs could never replace oil in global transport throughout the 21st century and far beyond. Even if 50 million EVs were on the roads by 2025, this will only reduce the global demand for oil by 2.56 million barrels a day (mbd) and not 4 mbd as the IEA claimed. However, 50 million EVs will never be seen on the roads even by 2050.
There will be no imminent energy transition. With global oil consumption currently exceeding 100 million barrels a day (mbd) and growing, the notion of imminent energy transition looks like a mirage. In fact oil and natural gas combined accounted for more than 60% of global primary energy consumption for the last thirty years. That remains so despite being challenged by serious environmental policies and despite a global expenditure of $ 3.0 trillion on renewable energy during the last decade. This is a hefty price to pay just to gain only a percentage point of market share from coal.
Oil and gas will remain the core business of Big Oil well into the future or at least until returns on clean energy start making commercial sense.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London