Has the world finally reached ‘peak oil’?

The International Energy Agency (IEA) says global oil demand will slow “markedly” in the coming years and a peak is “on the horizon”.

“The shift to a clean energy economy is picking up pace,” said the IEA’s executive director, Fatih Birol, “with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance.”

The report from the Paris-based agency, which was founded in 1974 to facilitate cooperation on energy and secure oil supplies, has reignited debate over whether the world has reached the point at which oil demand and production tops out and starts to decline – known as “peak oil”.

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The milestone would be significant for the planet because burning oil, along with gas and coal, is “creating the vast amount of emissions causing the global climate crisis”, explained The Independent.

So “if peak oil is to arrive in the near future”, said Forbes’ energy writer Ariel Cohen, “then our current decarbonization strategies… may be sufficient to reach the objectives of the Paris Agreement by 2050 with a temperature increase well below 2C in comparison to pre-industrial levels”.

What the papers say

The IEA assessment “will make gloomy reading for the Organization of the Petroleum Exporting Countries [Opec] and other petroleum producers”, said The New York Times. The report is also “likely to add to fears among oil traders that China, for decades the key driver of global oil demand growth, no longer performs this role”, it added.

There is a “dawning realization that China’s economic recovery from Covid isn’t producing the same sort of oil demand growth that China had prepandemic”, Henning Gloystein, a director at political risk firm Eurasia Group, told the paper.

By the end of 2028, said the IEA, more than 155 million electric vehicles will have been sold globally, half of them in China. This will mean that three million barrels of oil a day “that might have been consumed will instead remain in the ground”, said the NYT.

The continued growth of the electric car industry will be a key driver in the development, agreed Bloomberg. “For more than a century,” said the news site, “two trends in global transportation have been relentless: humanity’s desire for more cars and the consumption of ever-more oil to fuel them,” but “the second part, at least, may finally be coming to an end”.

By 2027, electric vehicles will “force a reversal to the era of rising demand for oil used in transportation”. It’s true that in “areas outside of transportation, such as plastics, petrochemicals, manufacturing and agriculture”, oil demand will continue to rise, but analysts expect that, by 2029, the EV shift will “bring total demand to its apex”.

Some are more cautious. Take the peak oil prediction “with a grain – or boulder – of salt”, warned Axios. “Supply and demand are notoriously hard to game out,” and it’s what happens after we hit the peak – whether that’s “a plateau, a gradual decline, or a steep one” – that matters most. Don’t forget that “theories about ‘peak oil’ supply once dominated energy economics discussions for decades but never came to fruition”.

Peak oil has been “the holy grail of resource economics for decades: prized and just as elusive”, agreed Cohen. Expert predictions on the timing range wildly, from the end of the decade to the mid-2030s, 2040 and 2050. Others predicted oil demand would peak as far back as 2000. “Extremely knowledgeable professionals cannot agree on the basic mechanisms or timing of peak oil,” he wrote.

What now?

Global demand for oil will continue to rise but the rate of increase is “forecast to slow to just 400,000 barrels a day in 2028”, said The Times, down from the expected growth of 2.4 million barrels per day (bpd) this year and the 860,000 bpd rise next year.

But that still means the world is expected to use 102.3 million barrels of oil each day in 2023. And big oil companies are cashing in while they can.

“Shell will ‘ditch’ a plan to gradually reduce oil production over the coming years and choose instead to ‘stabilise’ production until the end of the decade,” said City A.M. The “bombshell announcement” means “a 2021 plan to gradually roll back production of oil appears to have gone by the wayside”, the paper added.

Then there are the unknowns. The IEA itself admits “a number of factors could upend its forecast”, The Independent said. Those include “global economic shocks, decisions by the oil-production nations in OPEC+, and changes in China’s refining industry”.