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Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

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Bank Of America: Oil Demand Growth To Hit Zero Within A Decade

By 2030, oil demand could hit a peak and then enter decline, according to a new report.

For the next decade or so, oil demand should continue to grow, although at a slower and slower rate. According to Bank of America Merrill Lynch, the annual increase in global oil consumption slows dramatically in the years ahead. By 2024, demand growth halves, falling to just 0.6 million barrels per day (mb/d), down from 1.2 mb/d this year.

But by 2030, demand growth zeros out as consumption hits a permanent peak, before falling at a relatively rapid rate thereafter.

The main driver of the destruction in demand is the proliferation of electric vehicles.

Bank of America did offer a few caveats and uncertainties. The growth of EVs hinges on a handful of key metals. Lithium, for instance, is mined and produced in large concentrations in a few Latin American countries.

But cobalt looms as a larger concern for some automakers. Roughly 62 percent global cobalt output is found in the Democratic Republic of Congo. An executive from Ford said recently that automakers might feel compelled to invest directly in cobalt production over fears of securing adequate supply. “I fully anticipate we’re going to keep a lot of pressure on that cobalt production,” Ted Miller, head of energy storage strategy and research at Ford, said at a mining event in South Africa. “Today it looks feasible but it’s a scenario we’re going to have to watch.” Related: Canada’s Most Crucial Pipeline Comes Under Fire

The DRC just held a divisive election, and although the transfer of power has been mostly peaceful, the country has historically suffered from political instability. “Any major disruption to cobalt today would likely curb EV proliferation in the early 2020s, in turn supporting long dated crude oil prices,” Bank of America Merrill Lynch warned.

There are alternatives to cobalt, but that would merely put pressure on other materials. “Car producers may gradually substitute from cobalt to nickel over the next two decades. In turn, this shift may lead to soaring demand for nickel, creating another supply squeeze as mine expansion plans are limited,” BofAML analysts wrote in their report.

There are a long list of other uncertainties that complicate such medium- and long-term forecasting. A brewing economic downturn, which may or may not hit in the next year or next few years, could linger into the 2020s. That would alter oil demand forecasts, but in complicated ways. Slower economic growth would put a dent in oil prices via lower demand, but a lower price itself could keep consumers hooked.

The EV market is also rife with uncertainty. EV sales are growing quickly, with the number of EVs on the roads picking up pace. Automakers are set to roll out dozens of new models, which will expand choice and awareness, while also making progress on price, range, and performance. Bank of America Merrill Lynch sees EVs having a “meaningful negative impact” on oil demand from 2021 onwards.

Then, of course, there is the small matter of policy, which can cut both ways. Bank of America said that “the US's feeble commitments to climate action, fuel efficiency standards, and sulphur-limit reductions in shipping (IMO),” could slow EV adoption. But the next administration could also reverse course and step up climate ambition.

Even when breaking down oil demand into various segments, there is a lot of change going on. “EVs are shifting demand away from gasoline, IMO causes switching into diesel, and strong petchems demand growth is shifting demand toward the light part of the barrel, including NGLs in particular,” BofAML wrote. “We are at the beginning of a new age of uncertainty for oil producers, refiners and miners alike.” Related: Are Automakers Overestimating EV Demand?

Nevertheless, despite all of those uncertainties, the outlines of the trajectory are clear. Oil demand in the developed world saw a temporary boost over the last four years or so because of the collapse of oil prices. That has mostly run its course. Demand “should return to outright declines as the price effect wears off and efficiency takes over,” BofAML wrote.

Emerging market demand should continue to grow as more people acquire cars. China, however, has made a major EV push and its demand growth is already starting to slow.

“The major driver of structural change in oil demand trends in the next five years and beyond is expected to be electric vehicles,” BofAML said. By 2020, EVs will capture 5 percent of global vehicle sales, which will balloon to 40 percent by 2030, before rising to 95 percent by 2050.

All of that implies a peak in oil demand by 2030, a little over a decade from now. We are in the midst of the “biggest structural shift in demand growth since the proliferation of the car began in the early 1900s,” BofAML concluded.

By Nick Cunningham of Oilprice.com

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  • JACK MA on February 05 2019 said:
    Three things must happen for this to be true.

    EV prices must come down 50%.

    Solid State electrolyte cells must be perfected to end fire deaths in crashes.

    World climate will have to be controlled under a planetary bubble so there are no extremes similar to climate control in a computer bay.

    Then and only then, three MORE things must happen.

    Stick with oil as the upturn is here 2019-2026
  • MichaelGu on February 05 2019 said:
    A comprehensive piece of analysis on a variety of risks in mapping out the oil demand forecast. Agreed that EV is certainly in play to gradually replace oil in transportation sector that historically contributes to the largest demand for oil, despite near team uncertainty (5-10yrs) residing in the EV technology upgrading and EV market penetration speed, which could only be analyzed on a country by country basis. It will certainly call out more political attention to the source countries of metals used in the new age of electricity. Given that many of them resides in emerging markets if not underdeveloped, a familiar situation may emerge which reminds us of the beginning of OPEC and the painstaking conflict between consumer countries and producer countries during and after the Cold War period.
  • Donald Straub on February 06 2019 said:
    Bank Of America: Oil Demand Growth To Hit Zero Within A Decade

    If the argument for the above is based upon the premise of electrification of transportation it would appear BOA is living in fantasy land - and they need to consider the following:

    1) What BOA says might "hold water" for the US (urban) market, but certainly not the rest of the world.

    2) There is no "plug-and-play" solution to changing-out how Power Plants are powered (coal, oil, natural gas, hydro, nuclear, etc.) - that takes time and a lot of money.

    3) 1/3 of the world's population live in 2 countries - China and India. The trends suggest they will continue to burn fossils fuels for the foreseeable future. China is migrating to LNG as is the rest of the Far Eastern countries.

    4) Most people in the world cannot afford a 40-50K USD electric car, but they can afford a 1-2K USD gasoline burning motorbike.

    5) Aviation will continue to burn fossil fuels for the foreseeable future.

    6) Fossil fuels are not only a source of energy, but also an important building material in the petrochemical and pharmaceutical Industries. How is that building material going to be replaced?

    7) As correctly pointed-out, 62% of the world's supply of Cobalt is located in the DRC in Africa - a country with many problems and political instability. No company will ever bet their future on (one) instable country that has a virtual monopoly on an energy source. Not only that, there is not anything near sufficient reserves of cobalt to make a dent in or viably replace fossils fuels.

    8) No one talks about the environment impact of mining - most of which are open-pit mines.

    9) I would suggest BOA go to BP's Website and take a look at the Global Energy Trends. It's clear the future growth in energy supply will continue to be natural gas - which has been growing steadily since 1995 at the expense of increasing older and declining oilfield.

    Does the world need to migrate away from fossil fuels? Absolutely. Is it going to happen in a dramatic fashion as suggested by BOA - welcome to fantasy Island!
  • Mitch Farney on February 06 2019 said:
    If EVs proliferate like they figure, and destroy gasoline demand, what are we gonna do with all of it? Because most all the other refined products will continue growing in demand. And we will be swimming in gasoline under that scenario... which is self defeating to EV demand.
  • Mamdouh Salameh on February 06 2019 said:
    Reports by the Bank of America Merrill Lynch (BofAM) on global oil demand growth always tend to be off the mark based on faulty assumptions verging on wishful thinking. The latest report claiming that oil demand could peak by 2030 is no exception.

    In May 2018, the BofAML predicted that oil prices could hit $100 a barrel in 2019 supported by strong global oil demand growth, quickly falling inventories, and geopolitical issues from Iran to Venezuela. Brent Crude according to BofAML is expected to average $75 in 2019 (Ms Tsvetana Paraskova, May 10, 2018). Could the BofAML tell us now how close the global oil market is to achieving an oil price of $100 a barrel in 2019.

    ExxonMobil who knows one or two things about oil and certainly far more than what the BofAML would ever aspire to know said in its “Outlook for Energy: A View to 2040” that oil is projected to account for 33% of the global primary energy consumption in 2040 as it did in 2016 despite growing production and consumption worldwide. According to ExxonMobil, oil is expected to remain the world’s primary energy source, driven by demand for transport which is projected to grow by 20% between 2015 and 2040.

    Oil demand is projected to grow from 100 million barrels a day (mbd) in 2018 to 120 mbd by 2040, an annualized rise of 0.91% or 910,000 barrels a day (b/d). Moreover, global gross domestic product (GDP) is projected to grow by 45% from $80 trillion in 2017 to an estimated $116 trillion by 2030, accelerating demand for energy. Non-OECD nations, particularly China and India, will experience the most economic growth, driven by urbanization and the growth of the world’s mega-cities.

    And despite huge government promotional subsidies, the United Sates has only 1 million electric vehicles (EVs) on its roads. Moreover, only 360,000 EVs were sold in the US in 2018 out of total sales of some 17.2 million cars, merely 2%.This compares with 2.61 million EVs on the roads in China. Therefore, the claim by the BofAML that EVs will capture 5% of global vehicle sales by 2020 rising to 40% by 2030 before rising to 95% by 2050 is a bridge too far.

    Total global EVs are estimated at 4 million out of a global fleet of internal combustion engines (ICEs) of 1.5 billion or 0.27%.

    The penetration of EVs into the global oil market will continue to be slow hampered by cost and infrastructure. Even if 350 million EVs were to be on the roads by 2030 which is an impossibility, they will only be able to reduce global oil demand by 4%.

    Global oil demand will never peak throughout the 21st century and far beyond. Oil will continue to reign supreme all through. However, the advent of EVs could decelerate global oil demand growth.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Don Westlund on February 06 2019 said:
    Oil Consumption increases per year after the financial crisis:

    2008 -500,000 bpd (2008 and 2009 were the first years since the start of the Iraq war where we had declining consumption because of a price spike)
    2009 -1,500,000 bpd
    2010 2,100,000 bpd
    2011 2,600,000 bpd
    2012 800,000 bpd
    2013 2,000,000 bpd
    2014 800,000 bpd
    2015 2,100,000 bpd
    2016 1,800,000 bpd
    2017 1,600,000 bpd
    2018 1,600,000 bpd
    2019 1,300,000 bpd (expected)

    There are currently 1.30 billion cars and light trucks in the world today. How many of those are electric...maybe 2-3 million? It will take decades to turn over the fleet. I agree with B of A's thesis but I think it will take longer than they think. Even if they are correct....global oil production will have to be in the range of 110 mbpd by late 2020's and sustained there for many years...that is also questionable at $70-80 oil which B of A is also predicting.
  • Jim Szpajcher on February 06 2019 said:
    In addition to Dr. Salameh's comment, look at what the Bank of America has written: 62% of Cobalt comes from the Democratic Republic of Congo.

    One only has to ask: what nation would tie their energy security to the output from one unstable nation in Africa? China? India? Britain? Germany? Russia? The United States? Australia? France? Does anyone seriously believe that electric cars are going to be replacing internal combustion vehicles in any region where winter temperatures drop below freezing to any degree?

    This report is based on wishful thinking and not enough appreciation for the role of a secure source of energy in modern complex societies. I give this report as much credibility as Elon Musk's high-speed tunnel dreams - in other words, none at all.

    I would suggest that Nick Cunningham exhibit a bit more scepticism over such nonsense reporting: there is nothing on the horizon that will replace fossil fuels. Nothing. Peak demand is a possibility, however: any major global economic downturn will affect petroleum consumption. But that will not be because people are switching to electric vehicles, but because demand for all energy will decline as the standard of living in multiple nations declines.
  • Chris L on February 07 2019 said:
    I just think, that Nick Cunningham quoting this BofAML source, should now invite Alexandria Ocasia-Cortez as another "legitimate" source and forecaster. This total lack of judgment, and common sense, as well as reporting skepticism disqualifies him to report on this site anymore. I really think, that BofAML must have consulted Alexandria Ocasia-Cortez in issuing such a report.
    This attention grabbing headline is so ridiculous, as much as this new Congress woman pipe dream called Green New Deal of generating 100 percent of the nation's power from renewable sources by 2030.
  • Loran Tritter on February 07 2019 said:
    I guess fracking won't ever work anywhere but in the USA. The world will soon run out of oil, and its price will skyrocket. EV's powered by electricity generated by something or other will be the only option. Enough lithium and cobalt sources will be found, but crude oil output expansion is doomed by the Hubbert Curve.

    I think BofAM needs to hire some better analysts.
  • Duncan Forster on February 09 2019 said:
    Full marks to the author for presenting these - apparently - contentious findings by BOAML.

    Despite the biases of readers of this site, the MATH is in: In 2018, a year of global economic expansion, the passenger vehicle market logically experienced growth, but when you break out the numbers into electric vehicle sales and gasoline powered vehicle sales, the former experienced rapid growth, while the latter experienced a small decline.

    Put more simply: If the growth in sales of gasoline powered vehicles is declining while the growth in sales of electric vehicles is increasing, when should you sell your shares of ExxonMobil? You may not want to think about the answer, but you should.
  • Haji Drumph on February 11 2019 said:
    Global commulative sale of passenger EVs was 1 million at the end of 2016 , that rose to 3 million at the end of 2017 and 5 milliin by 2018. So we are seeing a doubling of EVs every one and half years. This trend will only accekerate as the new ZEV quota in China, zev region in big European cities ane new fuel stabdard come into effect and EVs get cheaper than ICE cars due to fallibg battery costs. I will be shocked if the global new car sales is not above 90% by 2025. This is in addition to 500k buses and trucks and 3million low speed electric cars and three wheelers already on the road. We have already startwd seeibg slowing of crude oil usage in mature EV markets such as Norway.BoA's predition is on times but could be little conservative.

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