By Lindsay Drogin
Experts differ about when peak oil demand will be reached.
Global demand for oil – projected to reach about 100 million barrels per day this year, is expected to peak and then gradually diminish because of decreased automotive gasoline demand. Gasoline – refined from oil – currently accounts for about a third of global oil consumption. Due to more stringent fuel efficiency standards around the world and increased adoption of electric vehicles, mainstream views acknowledge that global oil demand will reach a maximum at some point in the future and then start to taper off.
DNV-GL – a Norwegian consultancy group has offered the view that peak oil demand will happen around 2023; Wood MacKenzie – an American consulting group has opined it will happen around 2036. Royal Dutch Shell – a major European integrated oil company (IOC) has suggested that 2025 is a realistic date while Exxon Mobil (American IOC) has estimated that the date will be twenty years from now. The Europeans think it is coming sooner: the Americans think it is coming later.
They can’t all be right.
The timing of when peak oil demand occurs is of importance because of its potential to trigger revaluations of companies and assets in energy and related industries affecting insurance, asset owner, asset manager and lender portfolios.
As the below photos show, the massive technological shift from relying on horses to internal combustion engines (ICE) took 13 years to transform transportation and related sectors in the first part of the twentieth century. The energy transition underway to combat climate change, of which peak oil demand is just one component, is an investment theme of comparable disruptive magnitude to the widespread adoption of ICE to consider for the foreseeable future.
Easter Sunday – Fifth Avenue – New York City
Circa 1900 – spot the car Circa 1913 – spot the horse