Peak oil demand used to be projected decades into the future, igniting little urgency in the minds of investors and the public; however, new reports forecast this event much sooner.
Released in July, BP’s “Energy Outlook 2024” projects peak oil demand between 2025 and 2030, but is this true? Do other companies and agencies agree with this assessment?
A decade ago, discussions about peak oil often centered around when the world would run out of oil – as in, when peak oil supply, rather than demand, would occur. That debate was largely settled when the United States’ shale oil revolution reached its full scale. Most experts now agree that oil is abundant and affordable. Some even say the world might never run out of oil, as renewable energy accounts for a growing portion of global energy resources.
The world consumed 100 million barrels of oil per day in 2023, according to the Energy Institute, the United Kingdom-based organization that took over BP’s former role as publisher of the annual Statistical Review of World Energy. These reports suggest global oil demand has grown 1.1 percent each year over the past decade, excluding an 8.9-percent drop from 2019 to 2020 during COVID-19 and a 1.6-percent drop in 2009 following the global financial crisis.
BP presented its recent analysis under two scenarios: Current Trajectory and Net Zero. It projects oil demand would peak between 2025 and 2030 at 102 million barrels of oil per day in both scenarios. Under the Current Trajectory scenario, oil demand declines to 75 million barrels of oil per day by 2050. It drops to less than 30 million barrels of oil per day by 2050 under the Net Zero scenario.
Getting a Second Opinion
Several other agencies and companies have published long-term oil demand forecasts, most notably OPEC, the IEA, the EIA, ExxonMobil and Shell. BP’s potential 2025 peak oil demand projection is the earliest time published thus far.
In March 2023, Shell released its latest “Energy Security Scenarios” report, which includes two scenarios: Archipelagos, in which the world prioritizes energy security over climate change, and Sky 2050, in which the world achieves net zero by 2050 and limits global warming to less than 1.5 Celsius before 2100. Shell projects peak oil in 2035 at 103 million barrels of oil per day under Archipelagos and a few years earlier at roughly 100 million barrels per day under Sky 2050.
According to ExxonMobil’s most-recent “Global Energy Outlook,” published in January 2024, the company projects global liquid demand will continue to grow into 2050, from 100 million barrels per day at present, to 115 million barrels in 2050. Global oil demand will be met by increased production from natural gas liquids, biofuels and tight oil, which will more than compensate for the decline in production from conventional crude and condensate. These projections place peak global oil demand after 2050.
OPEC’s most recent “World Oil Outlook,” published in 2023, predicts oil demand will continue to grow until 2045 but doesn’t specify its peak, suggesting it would be in 2045 or later. OPEC predicts global oil demand will grow from 90.7 million barrels of oil per day in 2022 to 116 million barrels per day through 2045, at an average annual growth rate of 0.7 percent.
By 2045, OPEC proposes oil’s share in the global energy mix will decrease slightly from 31.2 percent to 29.5 percent, despite growth by absolute volume. It posits its share of global liquids supply will rise 10 percent between 2022 and 2045, fueled by rising demand from countries including India. Non-OPEC oil supply, including that from American shale oil, will peak around 2030 under this scenario.
The Energy Information Administration published its “International Energy Outlook” in October 2023 with reference, high and low projections until 2050. In its reference case, the EIA predicts global oil demand will grow to reach 121.5 million barrels of oil per day in 2050, fueled by growth in India, Southeast Asia and Africa. Oil demand in the United States would remain virtually flat from 2022 through 2050. The EIA’s predicted peak oil time would be in 2050 or later.
Finally, in its “World Energy Outlook 2023,” the International Energy Agency projects peak oil demand in 2029 at 102 million barrels of oil per day. The IEA forecasts oil demand will continue to grow until 2050 in petrochemicals, aviation and shipping and will be outpaced by the drop in road transportation. With rapid deployment of electric vehicles in big markets such as China, it’s possible that the EIA and/or OPEC will significantly change their predictions.
In summary, there is a clear distinction between projections of peak oil demand time: the IEA and European majors place it before 2030, and OPEC, the EIA and ExxonMobil place it after 2045 or 2050. This fundamental difference will likely continue to drive different investment decisions for the middle to long term in capital intensive oil exploration and development projects (see side bar).