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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Peak Fuel Demand Will Occur Within 10 Years


It has been a tough few months for the oil industry, and there’s more pain on the way as the industry struggles with disruptive forces that could completely transform it. Now, according to BloombergNEF, oil and gas companies have one more thing to worry about: peak fuel demand.  In an outlook for road fuels published earlier this month, BloombergNEF forecasts that gasoline demand will peak in 2030, with diesel following three years later. As a result, demand for crude oil from the road transport sector is seen peaking in 2031, BloombergNEF said, at 47 million barrels daily. That’s higher than BloombergNEF’s 2019 projection, which saw oil demand from light and heavy-duty vehicles peaking at 45.1 million bpd.

To fully realize the implications of this trend, here is some context. As of 2019, road transport accounted for more than 40 percent of overall global oil demand. What’s more, road transport has accounted for more than half of total oil demand growth over the past two decades. Peak demand for road transport fuels, therefore, is a harbinger of peak oil demand.

The immediate outlook for fuel demand is also not rosy, with the lockdowns and international movement restrictions erasing ten years’ worth of demand growth, according to BloombergNEF. This effect will likely be temporary; as lockdowns ease, demand for fuels begins to recover, even though it remains doubtful whether it will recover fully to pre-pandemic levels.

So, what are the culprits behind this looming slump in fuel demand? First, there is fuel efficiency: a factor that, according to BP, will improve so much that energy consumption in the transport sector will only rise by 20 percent by 2040. BP made that forecast last year, long before the coronavirus. Now, those changes could accelerate.

Besides fuel efficiency, there are also the alternatives to internal combustion engines, as well as ride-sharing services, BloombergNEF said, identifying both as disruptive forces for the long-term future of the oil industry. Electric vans and hydrogen heavy trucks are at the core of the disruption as regards alternatives to ICE vehicles.

Related: Russian Mercenaries Block Output Restart At Libya’s Largest Oilfield

Just how important these alternatives are for the future of oil demand becomes evident in this 2017 report by the International Energy Agency, which notes that heavy trucks, at the time, accounted for as much as a fifth of global oil demand, or some 17 million barrels of crude oil daily. Heavy trucks also accounted for half of the world’s diesel demand at the time.

And now there are electric trucks and hydrogen trucks. The clearest evidence yet of these new trucks’ transformative influence on the transport industry was the stock market debut of Nikola—the company that makes both battery electric and hydrogen fuel cell trucks, aiming to change the face of freight transport. With it, it could change the face of the oil industry.

But it’s too early to lament the oil industry with its two-pronged upstream/downstream revenue stream organization. The oil industry is not oblivious to fuel demand forecasts and is already preparing for a future in which the transport sector will not be the king of fuel demand.

Last year, Wood Mackenzie projected that demand for oil from the transportation industry will peak before 2030. At the time, Wood Mac analysts cited the growth in popularity for electric cars, higher fuel efficiency standards, and consumer preferences. Refiners were beginning to shift towards higher production of petrochemicals at the expense of fuels.

Now, the industry has been hit hard by the coronavirus lockdowns—an unforeseen event that that all but shattered oil demand. But another blow is brewing, too. After the pandemic revealed how we could reduce CO2 emissions by staying at home, a number of international agencies are calling for a so-called green recovery, including the International Energy Agency.

The IEA wrote in a report last week that “The world has a “once-in-a-lifetime opportunity” to pour investment into clean energy and create millions of new jobs.” The IEA has drafted a plan on how to take advantage of this opportunity and, unsurprisingly, transport reforms are a big part of this plan. These, the IEA proposes, should include financial incentives for drivers to switch from ICE cars to EVs or at least upgrade to more efficient ICE cars. The plan also includes investments in high-speed railways and improved public transport.


This plan—and other plans, mostly by European governments—will likely speed up the rate of decline in fuel demand, and we may see peak diesel before the end of the decade if all those alternatives live up to the promise. If the green recovery incentive schemes work, too, EVs will overtake ICE cars earlier than forecast before the crisis. All we have to do is wait and see how those ifs work out.

By Irina Slav for Oilprice.com 

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  • Mamdouh Salameh on June 28 2020 said:
    This is simply no more than wishful thinking and also self-delusion squashed by realities in both the global economy and the global oil demand.

    Five realities will continue to govern the global energy scene throughout the 21st century and probably far beyond. The first is that global economy runs on oil and natural gas and will continue to do so well into the future.

    The second reality is that there will be no post-oil era throughout the 21st century and probably far beyond. The third is that there will be no peak oil demand and therefore no peak fuel demand either well into the foreseeable future. Electric vehicles (EVs) even 100 million of them on the roads will only slightly decelerate oil demand growth by 2.87 million barrels a day (mbd) or 3.58% by 2040.

    The fourth reality is that an imminent global energy transition from oil and natural gas to renewables is an illusion. Moreover, zero emissions by 2050 is another illusion and the global oil industry knows it.

    The fifth reality is that oil and natural gas will continue to be the core business of the global oil industry and also the fulcrum of the global economy well into the future.

    Furthermore, global transport accounted in 2019 for 73% of global oil demand and not 40% as the author erroneously mentioned, petrochemicals 15% and the remaining 12% divided between plastics and electricity generation.

    Pressure by the environmental activists and oil and gas asset divestment campaigners will not change facts on the ground. Furthermore, without huge financial subsidies, EVs will only sell a few thousand cars.

    For now, we’re in an era of “energy diversification” where alternative sources to fossil fuels, notably renewables, are growing alongside—not at the expense of—the incumbents.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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