In June, the International Energy Agency (IEA) forecast Oil demand growth is expected to peak within six years. Later that month, the Energy Institute said demand was still growing and only slightly declining.
While the two reports paint quite different pictures, they offer a glimpse into the real future of oil demand and supply, especially when viewed in light of trends like the slowdown in U.S. oil production and the recent increase in Chinese domestic oil and gas exploration: Oil and gas aren’t going anywhere.
“Increasing EV use, the rise of clean energy technologies, and more widespread efficiency policies will combine to result in a much slower growth trajectory for oil demand, leveling off toward the end of the 2023-2030 forecast period,” the EIA predicts. I have written In “Oil 2024,” a long-term forecast of energy trends.
But this is closer to wishful thinking and idealism than reality. In the real world, EV adoption is expected to slow. Slow downSecond-quarter sales figures released this week by major automakers suggest some reversal, but hyperbolic predictions of an EV revolution have not materialized. Tesla, the world’s best-selling car maker, Posts Second-quarter shipments fell short of expectations.
But at the same time, GM reported that EV sales increased 40% in the second quarter. While it’s questionable whether this is something to celebrate, since automakers actually lose money on every EV they sell, GM is looking at it as a positive. investigation rear investigation This suggests that the appeal of EVs is fading among drivers.
A new survey was released by McKinsey that found that nearly half of EV drivers in the U.S. want to switch to internal combustion engine vehicles. While that figure was lower (29%) across the 15 countries McKinsey surveyed, it’s still significant when talking about revolutionizing and replacing internal combustion engine technology.
EVs are certainly impacting oil demand in China. In other parts of the world, namely Europe and North America, rising EV sales have had little impact on oil demand, with a 1% decline in Europe and 0.8% decline in North America, according to the Energy Institute. Meanwhile, Asia, including China, the world’s largest EV market, has seen a 5% increase.
To be fair, at least in China, this oil demand growth is beginning to slow. Crude oil imports have been trending lower than expected since the start of the year, and while some have argued that these forecasts were unrealistic, this decline is impacting the demand outlook. Moreover, several companies, including Chinese energy giants, are predicting that demand growth in China, the world’s largest importer, will peak.
State-run energy giant Sinopec, the world’s largest oil refiner, said in May that it expects the country’s demand growth to peak within three years. It cited growing EV sales as the reason for its forecast, and also said the country’s energy mix will be dominated by non-hydrocarbon sources by 2045.
Whether the latter prediction comes true remains to be seen, but Beijing announced this week the creation of a new state-owned enterprise to develop the country’s oil and gas resources, including unconventional reservoirs. The enterprise will consist of CNPC and Sinopec, as well as companies in the steel, equipment, and infrastructure industries. In other words, China is building an integrated oil and gas enterprise. This is not in contradiction to expectations of peak demand growth, but it does suggest that demand will stagnate for an extended period after the peak is reached.
China is not the only country that requires caution regarding the oil demand outlook. The modest declines in demand in Europe and North America are further evidence that the expected destruction of oil demand caused by the energy transition has not occurred. Even in Norway, which has the highest per capita EV adoption rate, oil demand has not actually decreased as the number of EVs on the road increases.
The EU is building more wind and solar power plants, but its hunger for natural gas is not waning. In its latest update, Europe Imported Despite sanctions against Russian hydrocarbons in general, Russian gas production in June increased 23% year-on-year, and last month Russia imported more gas than it imported from the United States.
Many forecasts predict the end of global demand for hydrocarbons. But the reality is that oil, gas, and even coal will continue to exist for a long time in post-industrial societies, even if demand growth starts to slow or even stops at some point. The problem with these post-industrial societies is that they need the products of the industrial world, and industrialization is inevitably tied to the cheap, 24-hour energy that hydrocarbons provide. The end of oil demand is by no means imminent.
By Irina Slav of Oilprice.com
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