The Biggest Argument For Peak Oil
It’s been two years since British oil and gas supermajor BP Plc. (NYSE: BP) dramatically declared that the world was already past Peak Oil demand. In the company’s 2020 Energy Outlook, chief executive Bernard Looney pledged that BP would increase its renewables spending twentyfold to $5 billion a year by 2030 and “… not enter any new countries for oil and gas exploration”. That announcement came as a bit of a shocker given how aggressive BP has been in exploring new oil and gas frontiers.
When many analysts talk about Peak Oil, they are usually referring to that point in time when global oil demand enters a phase of terminal and irreversible decline. According to BP, this point has already come and gone, with oil demand slated to fall by at least 10% in the current decade and by as much as 50% over the next two. BP noted that historically, energy demand has risen steadily in tandem with global economic growth with few interruptions; however, the COVID-19 crisis and increased climate action might have permanently altered that playbook.
However, BP has been forced to do a mea culpa after it became clear that the COVID-19 pandemic that began more than two years ago has not resulted in a significant reduction in oil demand.
In its Energy Outlook 2022 edition, BP has revised down its forecast for global economic growth saying global GDP will only contract 1.5% by 2025 from 2019 levels compared to its earlier projection of a 2.5% contraction.
BP notes that its former grim outlook was drawn up prior to the Russian invasion of Ukraine– another black swan event–which has driven global energy prices higher and cast an uncertain shadow over Russia’s oil and gas sector in recent months.
BP has predicted that oil demand will fall by 74% from 2021-2050, with global oil demand clocking in at a mere 24 million barrels per day by 2050. The International Energy Agency (IEA) has issued a similar forecast under a net-zero scenario though its trajectory of how the world will get there is different from BP’s. BP is, however, by no means the most bearish about global oil demand three decades out, with the Energy Watch Group predicting that oil demand will have virtually disappeared by that date.
Below is a table published by the Energy Intelligence Group that compares oil demand predictions by 28 organizations including a handful of Big Oil companies.
Oil Demand to 2050 | |||||
(million b/d) | Peak | 2030 | 2040 | 2050 | 2021-50 |
Energy Watch Group (0 Gt) | <2021 | 72 | 31 | 0 | -100% |
UNPRI 1.5 (2 Gt) | 2025 | 88 | 46 | 20 | -79 |
IEA Net-Zero (0 Gt) | <2021 | 72 | 43 | 24 | -74 |
BP Net-Zero (2 Gt) | <2021 | 90 | 55 | 24 | -74 |
UNPRI Forecast Policy (9 Gt) | 2026 | 99 | 63 | 37 | -61 |
IPCC 1.5°C Low Overshoot (1 Gt) | <2021 | 86 | 63 | 41 | -56 |
Total Rupture | <2021 | 88 | 59 | 41 | -56 |
Equinor Rebalance (9 Gt) | <2021 | 88 | 61 | 46 | -51 |
BP Accelerated (10 Gt) | 2025 | 96 | 72 | 47 | -50 |
IPCC 1.5°C High Overshoot (6 Gt) | <2021 | 99 | 78 | 53 | -44 |
DNV (19 Gt) | 2024 | 85 | 69 | 49 | -48 |
IEA Sustainable Development (8 Gt) | <2021 | 88 | 65 | 57 | -39 |
Total Momentum | <2021 | 94 | 74 | 63 | -33 |
IPCC 2°C (14 Gt) | 2030 | 100 | 88 | 70 | -26 |
IEA Announced Pledges (21 Gt) | 2030 | 96 | 84 | 77 | -18 |
BP New Momentum (31 Gt) | 2030 | 101 | 92 | 81 | -14 |
Equinor Reform (24 Gt) | 2030 | 100 | 92 | 84 | -11 |
Shell Sky 1.5 (18 Gt) | 2025 | 100 | 94 | 85 | -10 |
IPCC 2.5°C (29 Gt) | 2040 | 105 | 107 | 99 | +5 |
Shell Islands (34 Gt) | 2040 | 102 | 104 | 102 | +8 |
IEA Base (34 Gt) | 2040 | 103 | 104 | 103 | +9 |
IPCC 3°C (38 Gt) | 2040 | 104 | 108 | 106 | +13 |
Exxon | >2040 | 104 | 107 | 107 | +14 |
Opec (34 Gt) | >2045 | 107 | 108 | 108 | +15 |
Equinor Rivalry (32 Gt) | >2050 | 107 | 110 | 110 | +17 |
IPCC 4°C (52 Gt) | 2040 | 107 | 111 | 111 | +18 |
Shell Waves (35 Gt) | 2040 | 111 | 119 | 111 | +18 |
US EIA (43 Gt) | >2050 | 109 | 117 | 126 | +34% |
Projected oil demand to 2030-50 in million barrels per day in a range of scenarios. When available, projected CO2 emissions in billion tons are shown in parenthesis (2021: 34 Gt). Source: BP, DNV, Equinor, EWG, Exxon Mobil, IEA, IPCC, Shell, TotalEnergies, UNPRI, US DOE |
Source: Energy Intelligence Group
You will notice that no less than 10 organizations, including OPEC, Exxon Mobil (NYSE: XOM) and the Energy Information Administration (EIA), have predicted that global oil demand will actually grow as we go along and not shrink as most analysts have forecast.