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Tuesday, September 11, 2018 10:35:50 PM
Could Oil Demand Peak in Just Five Years?
Recent forecasts point to oil growth ending far earlier than many in the industry expect
New estimates are putting increased pressure on big oil companies to clarify how they intend to confront a looming energy transition. Photo: Justin Sullivan/Getty Images
By Sarah Kent
Sept. 10, 2018 7:01 p.m. ET
https://www.wsj.com/articles/debate-heats-up-over-when-era-of-oil-will-end-1536620460
LONDON—The Era of Oil is coming to a close but experts and corporate analysts disagree about just when that will happen.
The time left before global demand for crude peaks is increasingly tightening, according to new projections from industry analysts. Two reports published this week point to an end of oil’s growth within the next five years, far earlier than many in the industry are expecting.
Though most forecasts of oil’s demise project a long tail, the estimates put increased pressure on big oil companies to clarify how they intend to confront a looming energy transition.
Demand for fossil fuels will peak around 2023, as increasingly cost-competitive solar and wind are buoyed by supportive government policies to displace growth in oil, coal and natural gas, according to an analysis by London-based think tank the Carbon Tracker Initiative.
“It’s not a scenario; it’s just obvious,” said Kingsmill Bond, new energy strategist and author of the Carbon Tracker report.
Norwegian risk-management company DNV GL takes a similar view in an analysis released in London on Monday. It predicts oil demand will max out in five years’ time, making way for renewables to dominate an increasingly electrified and efficient energy system.
“The transition is undeniable,” said DNV CEO Remi Eriksen.
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The aggressive forecasts add to a raging debate among energy executives and analysts over what the coming decades may hold for the industry. Mainstream views have shifted from a decade ago, when many fretted over the prospect that oil supply could run out. Now, global ambitions to curb global warming, coupled with cheaper and better renewable technologies, are pressuring assumptions about long-term demand.
Investors are increasingly sitting up and taking notice, demanding big oil companies outline how resilient their businesses are to an energy transition. While the industry unsurprisingly has a more bullish outlook on the commodity, even some big oil companies acknowledge a tipping point may be coming sooner than previously anticipated.
Earlier this year, BP PLC said the world’s appetite for oil could plateau and then begin to decline between 2035 and 2040, acknowledging that renewables like solar power are growing faster than expected. Previously, the company had said crude demand would keep growing into the 2040s. Royal Dutch Shell PLC has said if serious global action is taken to combat global warming, consumption could peak by the mid-2020s. Both companies look at a range of scenarios when planning their strategies and don’t treat such numbers as forecasts.
“As an industry we will have to deal with radical uncertainty on a scale which we have not experienced before,” Shell CEO Ben van Beurden told an industry conference in March. “We ignore that at our peril.”
The International Energy Agency—whose outlooks are often used as an industry benchmark—has also published scenarios in which oil consumption peaks in the 2020s on the basis of aggressive climate action. But its central assumption is still that oil demand will continue to grow into the 2040s. That is also the view of U.S. oil giants Exxon Mobil Corp. and Chevron Corp.
“The oil companies and the IEA think we have decades to go,” Carbon Tracker’s Mr. Bond said. “This is a real turning point…[and] it’s jolly soon.”
Peak Pique
Within the oil industry, the amount of time left before demand peaks is the subject of hot debate
Carbon Tracker: fossil fuel demand to peak in 2023
DNV: 2023
IEA: demand continues to grow out to 2040
Equinor: around 2030
Shell: as soon as 2025, as late as 2040
BP: 2035-40
Exxon: demand continues to grow out to 2040
Chevron: no peak in the near or intermediate future
Wood Mackenzie: mid-2030s
Source: The Companies
Write to Sarah Kent at sarah.kent@wsj.com
Appeared in the September 11, 2018, print edition as 'New Fuels Bring End of Oil Era Nearer.'
Recent forecasts point to oil growth ending far earlier than many in the industry expect
New estimates are putting increased pressure on big oil companies to clarify how they intend to confront a looming energy transition. Photo: Justin Sullivan/Getty Images
By Sarah Kent
Sept. 10, 2018 7:01 p.m. ET
https://www.wsj.com/articles/debate-heats-up-over-when-era-of-oil-will-end-1536620460
LONDON—The Era of Oil is coming to a close but experts and corporate analysts disagree about just when that will happen.
The time left before global demand for crude peaks is increasingly tightening, according to new projections from industry analysts. Two reports published this week point to an end of oil’s growth within the next five years, far earlier than many in the industry are expecting.
Though most forecasts of oil’s demise project a long tail, the estimates put increased pressure on big oil companies to clarify how they intend to confront a looming energy transition.
Demand for fossil fuels will peak around 2023, as increasingly cost-competitive solar and wind are buoyed by supportive government policies to displace growth in oil, coal and natural gas, according to an analysis by London-based think tank the Carbon Tracker Initiative.
“It’s not a scenario; it’s just obvious,” said Kingsmill Bond, new energy strategist and author of the Carbon Tracker report.
Norwegian risk-management company DNV GL takes a similar view in an analysis released in London on Monday. It predicts oil demand will max out in five years’ time, making way for renewables to dominate an increasingly electrified and efficient energy system.
“The transition is undeniable,” said DNV CEO Remi Eriksen.
Newsletter Sign-up
The aggressive forecasts add to a raging debate among energy executives and analysts over what the coming decades may hold for the industry. Mainstream views have shifted from a decade ago, when many fretted over the prospect that oil supply could run out. Now, global ambitions to curb global warming, coupled with cheaper and better renewable technologies, are pressuring assumptions about long-term demand.
Investors are increasingly sitting up and taking notice, demanding big oil companies outline how resilient their businesses are to an energy transition. While the industry unsurprisingly has a more bullish outlook on the commodity, even some big oil companies acknowledge a tipping point may be coming sooner than previously anticipated.
Earlier this year, BP PLC said the world’s appetite for oil could plateau and then begin to decline between 2035 and 2040, acknowledging that renewables like solar power are growing faster than expected. Previously, the company had said crude demand would keep growing into the 2040s. Royal Dutch Shell PLC has said if serious global action is taken to combat global warming, consumption could peak by the mid-2020s. Both companies look at a range of scenarios when planning their strategies and don’t treat such numbers as forecasts.
“As an industry we will have to deal with radical uncertainty on a scale which we have not experienced before,” Shell CEO Ben van Beurden told an industry conference in March. “We ignore that at our peril.”
The International Energy Agency—whose outlooks are often used as an industry benchmark—has also published scenarios in which oil consumption peaks in the 2020s on the basis of aggressive climate action. But its central assumption is still that oil demand will continue to grow into the 2040s. That is also the view of U.S. oil giants Exxon Mobil Corp. and Chevron Corp.
“The oil companies and the IEA think we have decades to go,” Carbon Tracker’s Mr. Bond said. “This is a real turning point…[and] it’s jolly soon.”
Peak Pique
Within the oil industry, the amount of time left before demand peaks is the subject of hot debate
Carbon Tracker: fossil fuel demand to peak in 2023
DNV: 2023
IEA: demand continues to grow out to 2040
Equinor: around 2030
Shell: as soon as 2025, as late as 2040
BP: 2035-40
Exxon: demand continues to grow out to 2040
Chevron: no peak in the near or intermediate future
Wood Mackenzie: mid-2030s
Source: The Companies
Write to Sarah Kent at sarah.kent@wsj.com
Appeared in the September 11, 2018, print edition as 'New Fuels Bring End of Oil Era Nearer.'
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