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Is It Time To Worry About Peak Oil Demand?

Oil demand will continue to rise at least for the next decade, and possibly longer, but it is possible that peak oil demand could come at some point in the late 2020s if governments around the world implement low-carbon policies more rigorously, Neil Atkinson, Head of the Oil Industry & Markets Division at the International Energy Agency (IEA), told CNBC on Monday.

“If the world does implement policies more rigorously, peak oil demand could come at some point in the late 2020s or in the 2030s,” Atkinson said.  

The IEA isn’t putting an exact ‘date’ for ‘peak oil’ because no one knows when it will come, according to the IEA’s official.

“What we do know is even when oil demand does peak at some point in the future, it isn’t going to drop off a cliff because substitutability for oil in so many sectors is still elusive,” Atkinson said.

Shipping, aviation, trucking, and petrochemicals are still huge driving forces of oil demand, the IEA’s executive said, adding that global population growth is the driver of all these industries.

The key driving force of oil demand growth is population growth, with the global population expected to grow to some 9.5 billion in fifteen years’ time, Atkinson told CNBC. Related: Protect The Oil: Trump’s Top Priority In The Middle East

True, there are signs that oil demand growth is moderating, but “we must stress that it is still growth,” he said. Oil demand growth is moderating due to electric vehicles (EVs) and the power generation sector, where oil has already lost a big part of its share. Yet, people with rising incomes in the emerging economies will continue to buy mostly SUVs, underpinning oil demand, he said.

Analysts and top commodity traders see oil demand peaking at some point in the 2030s, but oil companies say that peak oil is nowhere in sight and there is still room to grow as demand will continue to rise in the foreseeable future.

Earlier this year, Amin Nasser, the chief executive of the world’s largest oil company Saudi Aramco, rebuked all those who predict the demise of the oil industry in the near future, saying that views that the world will soon run on anything but oil “are not based on logic and facts, and are formed mostly in response to pressure and hype.”  

By Tsvetana Paraskova for Oilprice.com

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  • James Hilden-Minton on November 04 2019 said:
    Yes, it is time to worry. EVs are growing like malignant tumors and are metastasizing into high use fleet vehicles. Government policies matter little at this point. The whole industry is in deep denial about the lumps in their breasts. Small tumors are not a big deal, right?
  • Mamdouh Salameh on November 04 2019 said:
    Don’t kid yourself and also don’t let the International Energy Agency (IEA) kid you with their superficial research.

    That are three major NOs in the world of oil: NO post-oil era, NO peak oil demand either and NO imminent energy transition for the foreseeable future. I will explain now why.

    There will be no post-oil era throughout the 21st century and probably far beyond. Oil will continue to reign supreme all through. 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.

    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 61% of global primary energy consumption in 2018. 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.

    And whilst wind and solar are being deployed quickly at an exponential rate, renewable energy installations are far too slow to catch the still-voracious appetite for fossil fuels. It is a fact needing acknowledgement in a world of over seven billion people, each of whom is wanting for more light, heat, mobility and gadgetry.

    And despite huge global investment in renewables, they pale in size when compared with that in oil and gas exploration and production, refining and petrochemicals. 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

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