(The Fuse) “I believe we may not see $100 (oil) ever again,” said Vitol’s Ian Taylor last week in London. His rationale for making such a prediction is the belief that global oil demand will peak in the medium term. “I have begun feeling that… we are coming to peak demand towards 2030,” said Taylor, the CEO of the world’s largest oil trader, as quoted by Reuters. Peak demand is the point at which the world’s oil demand stops growing for good—current global oil demand is 93 million barrels per day, with most estimates expecting that figure to grow to over 100 million barrels per day within the next five to ten years.
His comments come at a very curious time, given the current oil market situation, with prices in the $40-$50 range, U.S. consumption back on the rise, emerging markets seeing rapid economic development, and petroleum still making up more than 90 percent of transportation sector.
It’s premature to say that oil demand will peak anytime soon, or to pinpoint an exact timeframe when it will plateau and eventually decline. Global oil demand is made up of a number complex factors that are always in flux.
Taylor’s comments about peak demand (peak supply is out of vogue with the rapid growth of unconventional supply from sources such as shale) bring up a recurring topic that was discussed frequently over the past decade when prices spiked, U.S. fuel efficiency measures were put in place, and economic growth slowed. The concept became popular again a couple of years ago when Citi Research predicted peak demand by 2020 as a result of greater fuel efficiency and natural gas substitution, while a number of academics in California, led by Stanford’s Adam Brandt, explored peak demand by 2035 and forecasted all the way to next century. The Economist weighed in the debate, saying: “The world’s thirst for oil could be nearing a peak. That is bad news for producers, excellent for everyone else.”
It’s premature to say that oil demand will peak anytime soon, or to pinpoint an exact timeframe when it will plateau and eventually decline. Global oil demand is made up of a number complex factors that are always in flux. These include economic growth, population trends, consumer income, subsidy policies, engine technology, fuel economy, oil price volatility, and the performance of alternative fuel sources.