In June, the International Energy Agency (IEA) forecast peak oil demand growth in less than six years.
Later that same month, the Energy Institute revealed demand is still growing and where it declines, the declines are minuscule.
While the two reports paint two rather different pictures, they also offer a glimpse into the actual future of oil demand and supply, especially viewed in the context of trends like a slowdown in U.S. oil output and China’s recent boost in local oil and gas exploration. Oil and gas are going nowhere.
“Increased use of EVs, emerging clean energy technologies and more expansive efficiency policies are combining to chart a much slower growth trajectory for oil demand, plateauing towards the end of our 2023-2030 forecast period,” the EIA wrote in its Oil 2024 long-term forecast about energy trends.
Yet, this increasingly resembles wishful thinking and idealism rather than reality. In the world as it actually is, EV adoption is experiencing a slowdown, and while this week’s second-quarter sales figures from Big Auto suggest a partial reversal, the bombastic predictions of an EV revolution remain unfulfilled, with Tesla, the world’s bestseller, posting lower than expected deliveries in the second quarter.
At the same time, however, GM reported a 40% increase in EV sales for the second quarter. It is doubtful if this should be cause for celebration seeing as the carmaker is actually losing money on every EV it sells but GM is putting a positive spin on it—at a time when survey after survey suggests the appeal of EVs is waning among drivers.
The latest comes from McKinsey and reveals that close to half of American EV drivers would be willing to switch back to internal combustion engine vehicles. Globally, in the 15 countries where McKinsey conducted the survey, the percentage was lower, at 29%, but still significant when we are talking about a revolution and displacement of internal combustion technology.
EVs have certainly had an impact on oil demand—in China. In other parts of the world, namely Europe and North America, the growth in EV sales has had a negligible impact on oil demand, which, per the Energy Institute, fell by 1% in Europe and 0.8% in North America. At the same time, it rose by 5% in Asia, which includes the world’s biggest EV market, China.
In fairness, this growth in oil demand is slowing down, at least in China. Imports of crude oil have trended lower than expected since the start of the year and while it could be argued that expectations may have been unrealistic, the decline is affecting the outlook on demand. Then there are the forecasts, including from Chinese energy majors, that demand growth in the world’s top importer is about to peak.
Sinopec, the state energy giant and the world’s biggest refiner, reported in May that it expected demand growth in the country to peak in three years. The company cited growth in EV sales as the reason for its forecast and also said that, by 2045, the country’s energy mix would be dominated by non-hydrocarbon sources.
Whether the latter prediction will come true remains to be seen, as Beijing this week announced the setting up of a new state-controlled entity to develop local oil and gas resources, including unconventional reservoirs. The entity comprises CNPC and Sinopec, along with companies from the steel, equipment, and infrastructure industries. In other words, China is building an integrated oil and gas resource developer. This does not go against the expectations of peak demand growth, but it does suggest an extended plateau in demand after the peak is reached.
It is not only China that needs to be paid attention when it comes to oil demand prospects. The minor demand declines in Europe and North America are more proof that the destruction of demand for oil that the energy transition was expected to bring about is not happening. Even in Norway, the biggest per-capita EV adopter nation, demand for oil has not, in fact, declined as the number of EVs on the roads rose.
Neither has the EU’s thirst for natural gas declined as it builds ever more wind and solar. The latest update revealed that Europe imported 23% more gas from Russia in June than a year ago, despite the sanction push against every type of Russian hydrocarbon. In the previous month, Russian gas imports even exceeded imports from the United States.