Global oil demand is likely to keep rising for at least another 15 years before Asia’s fast growing economies catch up to the shift from hydrocarbons to electric power, a leading consultancy said on Monday.
“At some point in the next 20 years, it’s likely we’re going to see oil demand peak. Our own view at Wood Mackenzie, is around 2035, 2036,” Wood Mackenzie chairman Simon Flowers said in an interview with CNN Business.
The International Energy Agency, which monitors energy supply for the world’s richest countries, said earlier this year that there was “no peak demand on the horizon.”
A potential peak in oil demand is one of the central questions hanging over the energy industry. The timing could impact trillions of dollars of investment decisions and play a major role in the trajectory of greenhouse gas emissions.
Flowers said that there is already very little demand growth in the European Union, and “in time” demand in America will also drop off.
Almost all of the demand growth for oil is now concentrated in Asia. China, India, Japan, South Korea and Singapore are the top five oil importers in the region, according to Wood Mackenzie. Total demand for oil across those countries grew by 2.5% in 2018 to 25.9 million barrels per day, with China and India accounting for the vast majority of the growth.
“Eventually that too will give in as electric vehicles become competitive and start to take market share from the internal combustion engine,” Flowers said.
Once that shift to electric cars happens, China should be in a strong position to benefit.
The country has the world’s biggest auto market, it has manufacturing capability and “it has access to some of the key battery raw materials, like lithium, that we need for electric vehicles,” said Flowers.
China has invested heavily in the electric vehicle industry.
The government offered generous subsidies to electric and hybrid car buyers for years.
Beijing is now weaning customers off those subsidies, and shifting some of the burden of growing the electric car market to manufacturers. This year, new rules kicked in mandating that at least 10% of car companies’ sales be all-electric battery vehicles or plug-in hybrids. The rules apply to car manufacturers that produce or import more than 30,000 vehicles annually, and would rise to 12% in 2020.