mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Energy Abundance
Shell Thinks Peak Demand Is Just Around the Corner

Peak oil may soon be upon us, but if and when that happens, it won’t be supplies that will start to decline, but rather demand for the hydrocarbon. At a time when the world is better supplied with crude than ever before, analysts are concerned that consumers’ appetite for oil is going to start shrinking, and that this contraction could be just five years away. Bloomberg reports:

“We’ve long been of the opinion that demand will peak before supply,” Chief Financial Officer Simon Henry said on a conference call on Tuesday. “And that peak may be somewhere between 5 and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.”

Shell’s CEO’s sentiments mark his company as somewhat of an outlier in terms of its expectations for demand’s outlook, but even if his prediction that demand could peak in as soon as five years is a bit, well, premature, there’s a growing consensus that demand is going to start falling sometime relatively soon. Take this, from Shell’s rival oil major BP:

The anticipated increase in oil demand of about 20 million barrels a day over the next two decades will probably be big enough to overwhelm the impact of the electric car, Spencer Dale, chief economist for BP, said Oct. 11. Those vehicles will have a bigger impact in 30 to 50 years, although there’s a chance it could happen sooner, he said.

A recent report from the World Energy Council said that oil demand will peak in 2030, a short 14 years from now, and would taper off thereafter. The logic behind that report, and behind the prognostications of the Shells and BPs of the world, is simple: as efficiencies continues to rise and oil alternatives proliferate, demand for the product is going to flag. This will be most pronounced in the transportation industry, which constitutes the lion’s share of oil consumption in the form of refined petroleum products for fuel. There, higher mileage vehicles will hit demand hard (the auto industry saw fuel economy hit a record high last year), and a switch to electric vehicles powered by coal-, natural gas-, nuclear-, or renewables-derived electricity rather than oil-based gasoline will compound that problem for producers.

And make no mistake, this is going to be a massive headache for anyone in the business of selling oil in the coming decades. It’s going to be especially painful for petrostates like Russia or Saudi Arabia, because while the private industry already has its sights set on adapting to this challenge, countries of OPEC’s ilk will have a more difficult time diversifying away from the commodity upon which they’ve constructed entire regimes.

Features Icon
Features
show comments
  • Daniel Nylen

    Get realistic. There are 6-7 billion people here, with population peaking in about 20 years. As more of them go from extreme poverty to mere poverty to something approaching middle class, they all use more and more energy. Cheap energy is what allowed us to go from $1 per day to the wealth we have now. Whether water powered, steam, and now fossil fuel. Until we discover other cheaper energy supplies (that fusion that has been almost there for decades and decades), people need energy to have a decent standard of living.

    So peak energy demand means no more increases in standard of living, no more raising people from poverty etc. I’d love advanced thorium reactors and better environmentally clean batteries to take over, but rainbows and unicorns on treadmills are more likely in the next 30 years. China is still building coal plants at an incredible rate, etc. Oil isn’t going out until we find a better substitute and we haven’t yet. So demand isn’t going away yet.

    • Gary Hemminger

      Very good points Daniel. It is nice to actually see thought out logical arguments rather than mere blathering.

    • Fat_Man

      Amen.

      I assume that Shell’s comments are bovine dejecta meant to be feed to the credulous and stupid among the press and politicians, which is about 99.99% of the lot.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service