Oil forecasters have had the same long-term challenge for decades: figuring out how much of the world’s liquid hydrocarbons will be in demand years into the future, and where, and in what mix of products and uses. And for decades, the long-term view has been pretty much consistent: in aggregate, global demand increases as the economy and population grow. Near-term lines are jagged (current oil demand is more than ten million barrels per day lower than it was a year ago, thanks to Covid-19); long-term lines are smooth and moving up.
There’s something different though in the two most recent long-term forecasts, from the Organization of Petroleum Exporting Countries and the International Energy Agency. Those lines, eventually, stop going up. Demand comes very, very close to peaking, 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.
Importantly, though, there are a half-dozen other projections of future oil demand that drop below 2019 levels, sometimes dramatically, thanks to equally dramatic policy interventions. Peak oil demand is also business as usual for some companies heavily invested in oil’s future.
Equally dramatic, if less heretical to technology-minded energy analysts and observers, is what the IEA sees as the cheapest fuel today and into the future. Solar will be “the new king of the world’s energy markets,” says the IEA’s executive director Fatih Birol. Even though OPEC’s outlook only concerns oil, we should apply some creative thinking to the cartel’s view of energy’s future. I’ve done this before, and last time noted that the components of oil demand growth were already heavily skewed to a few sectors like road transport, petrochemicals, and aviation. Covid-19 has set aviation reeling this year, though road transport has recovered, as has petrochemicals demand in some markets. More importantly, 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.