The phrase “peak oil” has been getting a lot of airtime in the media lately. One headline scoffs at the idea of peak oil in the near future, while another says that OPEC believes rich countries have already reached it. Some articles proclaim that peak oil will be a product of demand rather than supply, while others argue the exact opposite. Either way, the threat of peak oil has certainly grabbed the attention of the media this year. Earlier this month, the International Energy Agency’s executive director Fatih Birol announced that his agency expects oil demand to plateau extremely soon - by the end of this decade. "This reinforces oil demand for cars plateauing in this decade at roughly 2019 levels of demand, before declining after 2030," the IEA stated.
The expected decrease in demand for autos “paired with current sinking demand for oil and volatile prices, and broad shifts towards climate policies worldwide, means that the world's petrostates must find other ways to sustain their economies,” Fortune reported this week. This sentiment was also stressed by the IEA, which warned countries with non-diversified, oil-based economies around the world to start preparing themselves for a future in which they can no longer rely on oil exports to keep their country afloat. "They have to prepare themselves before it is too late," Birol said in a Tuesday interview with Bloomberg TV.
Predicting when peak oil will occur is not an easy math problem, but until now it’s been fairly widely accepted that as long as global populations and economies are growing, oil demand will grow as well. But it seems that common wisdom is now changing, with the IEA and OPEC both appearing to alter their outlook. According to Bloomberg Green, both groups see demand growth slowing to a stop “even in the most conservative (and for oil, most bullish) scenarios. OPEC and the IEA see demand continuing to grow through 2040, and OPEC even sees 2045 demand very slightly lower than in 2040.”
So what’s next for the energy sector and the world in a post-peak future? According to IEA’s Fatih Birol, solar energy is poised to be “the new king of the world’s energy markets.” But according to Bloomberg Green, in a broader sense, the next big thing in energy is technology. In fact, Bloomberg Green contends that technology will play a direct role in oil’s demise, saying that: “technological developments now make oil’s supremacy less certain, in the same way that solar’s growth and development has changed coal’s growth prospects.”
The Bloomberg Green article, headlined “The Future of Energy Is About Technology, Not Fossil Fuels,” conducts an analysis of OPEC’s collected statements over time, accounting for how often different terminologies are used in order to gauge their relevance and importance in OPEC’s worldview and gameplan.
For comparison’s sake, the article first looks at OPEC’s World Oil Outlook from 13 years ago, when demand was soaring, supply was tight, and oil prices were high. In that context, mentions of “resources” abounded, popping up on one out of every three pages, whereas “technology” was only referenced on about a quarter of the pages. “‘Climate’ was hardly mentioned and electric vehicles weren’t mentioned at all,” the article notes.
Based on the premise of the article, one might think that the most recent OPEC World Oil Outlook would have the word “technology” splashed on every page. On the contrary, there was a huge drop in mentions of technology this year, “but something heretofore unmentioned appears almost 400 times: the Covid-19 pandemic.” Bloomberg Green argues that this doesn’t speak ill of technology's relative importance, however. “It’s only fair that technology and electric vehicles, which at this point are long-term trends for oil, are mentioned relatively less this year,” the article continues. “The question for the long term, though, isn’t about a pandemic. It’s about technology, and whether or not oil demand responds to new technologies the way coal is now responding to solar: with structural decline.”
The message is a simple one: don’t get caught up in the abnormal rhetoric of the pandemic era. Eventually, COVID will clear, but the end of the road for fossil fuels will still be laid out just as clearly as before - if not more so. In fact, COVID has just pushed the world further toward green energy technology and a global green energy transition as world leaders draft and instate green stimulus packages for a post-pandemic economic recovery.
By Haley Zaremba for Oilprice.com
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