A new report from Wood Mackenzie argues that peak oil market demand will not occur before 2035, but we are seeing facets of it already
The Rise and Fall of Black Gold, released by international natural resources consultancy Wood Mackenzie, offers an analysis of peak demand, identifying the drivers as well as the potential impact of this global transformation – across regions, sectors, and fuels.
Wood Mackenzie argues that the market faces a number of fundamental structural changes: the story is not one of a simple peak and decline.
Transport fuel demand, for example, highlights the challenges facing the oil market. Of the 96mn bpd consumed worldwide, almost 60mn bpd of that demand comes from the transport sector.
Technological advances, both in fuel efficiency and in hybrid and electric vehicles, will erode demand for transport fuels. But that erosion will not be felt uniformly across the world.
Demand across the OECD will revert to structural decline by 2020, wiping out about four million bpd of demand by 2035. Throughout the decade from 2020, a combination of factors, including electric vehicle take-up, as well as government policies and a mature transport sector, will lead to declines in OECD transport oil demand.
In contrast, Wood Mackenzie expects demand in non-OECD economies to grow by nearly 16mn bpd by 2035, due in part to rising income levels and a growing middle class boosting demand for transport fuel. On top of this, demand for consumer goods, including plastics, and the need to move freight in an increasingly consumer-driven world, will also contribute to non-OECD oil demand. Non-OECD demand growth slows from 2030, driven by a stall in oil demand growth in China.
The petrochemical sector is one of the few bright spots for oil demand. Petrochemical feedstocks make up just over 10 per cent of total oil demand at present, but Wood Mackenzie sees significant growth over the next 20 years. Feedstocks are forecast to add six million bpd to total demand by 2035 – an increase of 50 per cent from today's feedstock demand.
Wood Mackenzie does not foresee peak oil demand before 2035, but argues that we are seeing facets of it already. The oil industry needs to plan for the changes and challenges ahead.
