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Adherents of the currently faddish demand side of "Peak Oil" theory (as opposed to the formerly faddish supply side, which was completely blown out of the water in recent years by the shale revolution) received a big dose of bad news over the weekend from OPEC. At a meeting with its non-OPEC oil-exporting partner nations in Algiers, the organization's new report projects global crude demand to rise at an annual average of 1.4 million barrels of oil per day (bopd) through 2020 and by 1.2 million bopd from 2021 through 2023.
The report does project slower demand growth thereafter, but does not foresee a "peak" in global crude demand anytime before 2040, by which time total demand for crude oil will have risen to almost 112 million bopd. As the Wall Street Journal points out, that is up from OPEC's forecast last year for 2040 demand of roughly 107.5 million barrels a day.
The "Peak demand" finding by OPEC is right in line with a similar projection from the International Energy Agency earlier this year , but a bit at odds with a statement by Shell Oil Co. CEO Ben Van Beurden in March that demand could peak as early as 2025 if every nation meets its goals set out in the Paris Climate Accords: “It depends on what you want to believe. If you believe that Paris is going to be a success, that somehow the nations of this planet are going to get our act together, are going to be effective in devising and enforcing policies that will decarbonize the energy system, my expectation is then that oil demand will peak in 2025, 2026." Of course, while this was widely reported as a "prediction" in the energy-related media, Van Beurden went on to clarify that that was not at all the case, characterizing this possibility as "the Goldilocks scenario.”
We all know that "Goldilocks" is a fiction, and as we have found in the months since Mr. Van Beurden's statement, so is the thought that most nations would be meeting their Paris goals. The reality is that very few nations are in fact doing so, and as I pointed out in a piece last month, "China's 2017 emissions rose by 1.6 percent over 2016. India's were up 4.4 percent, Indonesia's by 5.5 percent. In Europe, from which much of the criticisms of the U.S. have originated, more than half of all countries saw their emissions increase during 2017. Total emissions in Europe were up 2.5 percent during that time frame, and overall global emissions rose by 1.6 percent."
These rising carbon emissions are a clear sign that, despite hundreds of billions of dollars in new investments, the rapid adoption of solar, wind and other renewable power sources envisioned in the Paris agreement is not coming about as envisioned, lending much more credence to the scenario envisioned by OPEC and the IEA. Even that 2040 peaking scenario could well end up being overly-optimistic. After all, the IEA has consistently been forced to upwardly revise its initial annual demand growth projections in recent years , as has OPEC.
It seems that these and other organizations consistently tend to overestimate the willingness of developing nations to bear the cost of adopting renewables as primary energy sources, and at the same time tend to underestimate the pace of economic growth, and thus energy demand, globally. Put it all together and you end up with the projected date when "peak demand" for crude oil will finally arrive being pushed ever further out into the future.
