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What Peak Oil Demand Would Do to the Global Economy

“Peak oil” supply concerns have been dismissed as groundless foolishness in recent years, with the American shale revolution acting as the nail in the coffin of the notion peddled by doomsaying greens. But though oil production is booming around the world, and despite the fact that a global glut has brought crude prices down to less than half of what they were 28 months ago, there’s a new “peak” concern for crude: namely, that demand for oil is going to begin to fall within the next 20 years.

Unlike those fears over hydrocarbon scarcity, there are some concrete reasons to be concerned about the future of oil demand. Electric vehicles are gaining market share, and because they don’t run on refined petroleum products, their ascendancy will naturally impact the oil sector. But the global economy is intricately tied to the oil industry, and if demand does peak around 2030, trillions of dollars of economic activity could be affected. Bloomberg reports:

A quarter of outstanding global corporate debt, or as much as $3.4 trillion, is linked to the utility- and auto-industry bonds that rely on fossil fuel activities, [Fitch Ratings] wrote in a report published Tuesday.

Batteries have the potential to “tip the oil market from growth to contraction earlier than anticipated,” according to Fitch. “The narrative of oil’s decline is well rehearsed — and if it starts to play out there is a risk that capital will act long before” and in the worst case result in an “investor death spiral.”

A lot could happen between now and then, but it’s worth keeping in mind just how disruptive even a slight dip in overall oil demand could have for companies the world over.

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