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Peak oil in 2028, says Rystad



For years, industry theorists have speculated on the likely event of “peak oil”: where the rates of oil production will cease to increase and begin a terminal decline, whether due to a global energy transition, the economic viability of exploration and production, or simply a fall in the availability of resources. 

Peak oil is coming sooner than expected, but how will that affect workers?
(Image via Unsplash)

The laws of entropy dictate that such a day is inevitable, yet many within the industry have been reluctant to accept that peak oil could arrive sooner rather than later. Those who warn of peak oil are often brushed off as doom-mongers, overselling the industry's expiration like Cassandra prophesising the fall of an empire. Our own reader poll, conducted just last year, demonstrated that 41% of engineering professionals believe that an increasing demand for petrochemical products will offset peak oil, while a further 33% think “there will always be plenty of demand for oil and gas”. 

But as we have discovered in so many ways this year, the world is changing faster and more dramatically than we could have expected. And so, armed with the most recent data, Norwegian energy consultancy Rystad - a longstanding and reliable source of oil & gas forecasting - has set the date of peak oil for just eight years time. 

According to the firm, global oil demand will peak at 102 million barrels per day (bpd) in 2028. This is a shift from their previous estimates of a 106 million bpd peak in 2030.

Rystad put the change down to the lasting impact expected of the Covid-19 virus on global oil demand. The firm’s modelling is based on the most likely of three scenarios, one that they call the “Governmental Targets Scenario”. In this model the firm are assuming that the share of oil in various sectors will develop in line with stated government goals to move towards a cleaner carbon future - particularly highlighting the widely planned electrification of transport. 

Rystad Energy predicts that we will reach peak oil globally by 2028
(Image via Rystad Energy)

Demand in 2020 is expected to have fallen to 89.3 million bpd, down from 2019’s 99.6 million bpd. Rystad predict a recovery to pre-virus levels will take until 2023 with an estimated 100.1 million bpd - assuming an ending to regional lockdowns and at least partial recovery of international aviation. 

“The slow recovery will permanently affect global oil demand levels, shaving at least 2.5 million bpd off our forecasts made before the coronavirus. We have lost at least 2 years of oil demand growth in 2020 and 2021, while before the virus we expected yearly growth of 1 million bpd. The lockdowns will stunt economic recovery in the short-term and in the long-term and the pandemic will also leave behind a legacy of behavioural changes that will also affect oil use,“ says Artyom Tchen, Senior Oil Markets Analyst at Rystad Energy.

The lasting impacts of a fall in demand over the past year will coincide with the accelerating energy transition as governments, supermajors and investors refocus efforts on renewable energy targets and individual behaviours change. As renewables continue to get cheaper and the availability of clean energy gets more prevalent, the need for increasing amounts of oil is lessened. 

“Overall, we do not believe Covid-19 has put peak oil demand behind us, but we do acknowledge the pandemic will greatly alter the peak oil demand reckoning moment, both in terms of timing and volumes. This will help oil substitution gain speed and inevitably take global consumption to lower levels quicker, hand in hand with the energy transition,“ Tchen concludes.

Will there still be opportunities for oil and gas workers?

Peak oil does not mean “no oil”. Though global demand will fall after 2028, certain locations will continue to see growth. China and India have long been seen as the future leaders in oil demand, and that is not expected to change any time soon, despite the respective governments recently announced new targets on carbon neutrality. 

Rystad highlight ongoing economic expansion and middle-class growth plans across Asia and South America as reasons for a probable oil growth through 2030, though they stress that increasing energy demand beyond that point will largely be satisfied by alternative sources and new technologies in a decarbonisation push. 

Additionally, developing countries in Asia and Africa are expected to see a sustained increase in oil demand through to the end of the 2040s due to “infrastructure hurdles and heavy discounts on imported used internal combustion engines [which] will make it harder for new technologies to penetrate these regions, particularly in rural areas”. 

For those working in oil and gas, who do not see themselves transitioning to newer industries, this raises hope for future prospects in certain regions. At the very least, production will increase until 2028 and, as we are all very aware these days, even the best predictions can be proved wrong. 

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Recent Comments
I think the oil industry will prevail much longer than what we think due to the fact that renewables are limited in their application like solar or wind. Take for instance electric vehicle it could start running massively on the streets but the consumption of power might could be much higher than now as a consequence poilution and cost will also increasewhere we are right now. So we can see that until we have solid alternatives that guarantee less pollution and cost the hydrocarbon still have quiet a way to go.
RACHID CHEDID, 09 November 2020
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Peak oil in 2028, says Rystad - Time to read 5 min
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