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Global oil demand could peak within 20 years driven by a rapid shift towards electric vehicles (EVs). That is the conclusion of one of the world`s most influential oil consultancies. Wood Mackenzie. which last recently warned its clients oil demand could begin to decline much earlier than many of oil majors expect.
In comments reported by the FT. Ed Rawle. Wood Mackenzie`s head of crude oil research. revealed the company had reappraised its projections for lone term oil demand and is now predicting oil consumption will peak around 2036.
The projections are the centrepiece of the company`s flagship long term energy outlook briefing. which was distributed to clients in May but was reported on for the first time by the FT today.
The report provides further evidence of how the oil industry is starting to plan for a potential peak in oil demand. `A lot of our clients recognise that peak demand is real.` Rawle was quoted as saying. `It`s just a question of when it arrives.`
However. Wood Mackenzie`s 2036 date for peak oil demand is significantly earlier than the date included in many oil majors` base case scenario planning and investment plans. As such it is likely to further fuel fears that oil and gas companies could end up creating a `carbon bubble` whereby they invest in assets that become overvalued and stranded.
Some oil majors have started to acknowledge a peak in oil demand could come by the 2030s or even earlier. if demand for EVs accelerates. However. others maintain oil demand will continue to rise throughout much of the first half of the century. breaking carbon budgets and making the goals of the Paris Agreement on climate change unattainable in the process.
Rawl said Wood Mackenzie`s new projections were driven by a new understanding of rapid changes in the automotive industry related to both EVs and autonomous vehicles.
`Autonomous electric vehicles or robo-taxis will really change the face of transport in the coming decades.` he predicted. `We presume they become commercial by 2030 and widely accepted by 2035. with each autonomous electric vehicle expected to have a larger impact on curbing oil demand than a conventional electric car. They will be on the road far more as they are autonomous. displacing a disproportionate amount of oil-based transport.`
He added that rapid strides in fuel efficiency is also likely to have a dampening effect on oil demand growth over the next decade. meaning petrol demand could peak as early as 2030.
Demand for oil from petrochemical companies is expected to compensate for slowing demand from transport in the medium term. although growing concerns about the impact of plastic waste could similarly impact future demand.
Wood Mackenzie`s projections will further highlight the need for oil companies to consider if their long term investments are compatible with future demand.
However. the predictions are not unprecedented and other scenarios suggest oil demand could peak even earlier.
A scenario undertaken by Shell earlier this year that was designed to be fully compatible with the Paris Agreement suggested oil demand could peak in the late 2020s as demand for EVs soars and industrialized nations seek to deliver net zero emission economies by the 2040s.
Equally. recent research from Bloomberg New Energy Finance (BNEF) has suggested plummeting battery costs means EVs could compete with conventional cars on both a total cost of ownership and upfront cost basis during the 2020s. well before Wood Mackenzie`s projected date of 2030.
