While various experts and industry players debate if there will be peak oil demand anytime soon, Bank of America Merrill Lynch thinks that it may be just 12 years away—in 2030—when electric vehicles (EVs) will account for 40 percent of all car sales, thus eating at the demand for oil as a transportation fuel.
“Electric vehicles will likely start to erode this last major bastion of oil demand growth in the early 2020s and cause global oil demand to peak by 2030,” Bank of America Merrill Lynch analysts wrote in an emailed report, as carried by Bloomberg.
The rise of the EVs is considered one of the top threats to oil demand in the long term, and while Saudi Aramco’s chief executive Amin Nasser thinks that EVs won’t be a real threat to oil consumption for decades to come, others—including the oil supermajors—have been predicting that the world will face peak oil demand at some point between the years 2035 and 2050. Shell expects peak demand in the early 2030s and has been aligning its portfolio toward natural gas. France’s Total is also putting more weight on natural gas in its portfolio.
No one can pinpoint for sure the exact year of peak oil demand, but according to a recent paper by BP’s chief economist Spencer Dale and the director of The Oxford Institute for Energy Studies, Bassam Fattouh, the focus shouldn’t be on the date at which oil demand peaks, but rather the fact that the peak is coming at all. “The significance of peak oil is that it signals a shift from an age of perceived scarcity to an age of abundance,” Dale and Fattouh wrote. Related: Nord Stream 2 Is A Game Changer For Gazprom
If China follows through with its plan to significantly increase the pace of adoption of EVs, it could cause a crash in oil prices, some analysts reckon.
According to energy consultancy Wood Mackenzie, the rise of EVs and renewable energy explains some of the widening divide between oil demand in the developed and emerging economies.
“Demand for oil in developed countries will revert to structural decline by 2020, wiping out about four million barrels per day by 2035. In contrast, developing economies will increase their demand for oil by nearly 16 million barrels per day by 2035,” WoodMac said at the end of last year.
“While transport demand will flat-line around 2030, we forecast continued growth in overall global oil demand, supported by the petrochemical sector. Nonetheless, the prospect of peak oil demand is very real,” the consultancy noted.
By Tsvetana Paraskova for Oilprice.com
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The global demand for oil will continue to grow in absolute terms all through the 21st century and far beyond though the rate of growth will decelerate as a result of wider electric vehicle use.
Some experts are now saying that widespread electric vehicle use could spell the end of oil. The tipping point, they reckon, is 50 million EVs on the roads. This they believe could be reached by 2024. However, 50 million EVs could hardly make a dent on the global demand for oil let alone replace it.
A tipping point for oil could only be reached once 739 million EVs (50% of the current global number of conventional cars) are on the roads worldwide within the next fifty years. This is impossible to achieve within that time frame.
Moreover, there will be a need for trillions of dollars of investment to expand the global electricity generation capacity in order to accommodate the extra electricity needed to recharge 50 million EVs.
Oil will continue to reign supreme through the 21st century and maybe far beyond. There will be no post-oil era throughout the 21st century and probably far beyond.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London