Wood Mackenzie, one of the world’s most influential oil consultancies, has forecast that peak oil demand will arrive in 20 years.
In its long-term outlook, Wood Mackenzie sees oil consumption topping out at around 2036.
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BP has previously predicted that oil demand will peak by the late 2030s.
What is peak oil?
Peak oil is the theorised point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. The concept is credited to geologist Marion King Hubbert.
Ed Rawle, Wood Mackenzie’s head of crude oil research, told the Financial Times: “A lot of our clients recognise that peak demand is real. It’s just a question of when it arrives.”
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By GlobalDataWhy is peak oil demand forecast to be reached in 2036?
In the past, the oil market was concerned with peak oil supply, but it is now generally believed that supply issues will not cause oil production to reach a peak.
Focus has shifted to demand factors that determine oil production.
Wood Mackenzie attributes peak oil demand in 2036 to the increasing shift in the transport sector towards electric cars and autonomous vehicles.
“Autonomous electric vehicles or robo-taxis will really change the face of transport in the coming decades,” Rawl told the FT. “We presume they become commercial by 2030 and widely accepted by 2035, with each autonomous electric vehicle expected to have a larger impact on curbing oil demand than a conventional electric car. They will be on the road far more as they are autonomous, displacing a disproportionate amount of oil-based transport.”
Carbon Tracker’s latest report finds that two million barrels per day of oil demand could be displaced by electric vehicles by 2030. According to Wood Mackenzie, currently of the 96 million barrels of oil consumed globally each day, almost 60 million are used in transport.
Improvement in fuel efficiency standards will also lead to a decrease in demand, especially for petrol, which is expected to be the first component of oil demand to peak around 2030 according to Rawl.
What does this mean for today?
Seeing peak oil demand on the distant horizon, does not mean lower prices in the short term, Rawl told the FT. He said that while growing US supply, especially from shale, is expected to turn the US into by far the biggest oil producer by the middle of the next decade, output from other countries outside Opec is expected to slow around 2023, leading to more reliance on the cartel.
Wood Mackenzie’s prediction for peak oil is earlier than many industry players expected and could impact the long-term investment case for major oil projects.
