Oil demand set to peak in 2026; Rystad Energy
London (Quantum Commodity Intelligence) - Energy consultancy Rystad Energy became the latest industry voice to advance its peak oil demand forecast, making a case for a 2026 peak in a company paper released Wednesday.
The Norwegian-based consultancy said that the rapid adoption of electrification in transport and other oil-dependent sectors is accelerating, leading Rystad to advance its forecast by two years.
'Rystad Energy is downgrading its peak oil demand forecast to 101.6 million barrels per day (bpd), a pinnacle that will come in 2026, earlier than thought, plateauing before falling below 100 million bpd after 2030,' said the report.
Oil demand will be whittled away primarily by a growing electric vehicle (EV) market, but other sectors will be impacted at varying paces.
"We forecast tectonic shifts – some sudden and others slowly evolving – in plastics recycling, a growing share of hydrogen in the petrochemical sector, and oil substitution in power, agriculture, and maritime sectors."
In the past 12 months, BP, Equinor, Goldman Sachs and Wood Mackenzie have all brought forward their outlook for peak oil demand
Rystad gave the following breakdown of each sector;
Road transport (passenger vehicles, buses and freight), which makes up over 48% of oil demand, will be the ultimate driver of the transition.
The swiftest transition is already well underway in the electric passenger vehicle sector, which currently makes up 6% of global vehicle sales, but will account for 23% by 2025 and then accelerate towards 96% penetration by 2050.
Trucks, which account for 18% of total demand, will not electrify in the short-term, but when the adoption occurs in the mid-2030s and begins reaching critical mass, the substitution impact will be much higher on a per-unit basis compared to smaller vehicles that use less fuel.
EV trucks will benefit from the technology groundwork already being established in passenger vehicles.
Buses will also see a gradual transition from petroleum diesel to electric and biofuels. The EV truck market share will rise to 6% in 2025, 21% in 2030, and 61% in 2040.
Petrochemicals, which make up 14% of total oil demand, are expected to grow until at least the mid-2030s as plastics consumption per capita grows worldwide.
The demand then peaks as plastics recycling rates converge towards 75-80%, as observed in glass and metals, from the current effective rate of 5%, at the same time as hydrogen-sourced feedstock picks up from less than 1% today to 30% of the virgin petrochemical feedstock for LDPE, HDPE, PP and PVC plastics production in 2030.
Maritime, which makes up 6% of demand, is expected to be dominated by oil for at least through the mid-2030s, after which we expect to see switching to LNG, hydrogen, electric batteries, and other carbon-neutral vessels, especially in newbuilds.
This sector already underwent a big transition with IMO 2020, which saw the switching from high-sulfur fuel to ultra-low sulfur fuel.
Aviation, which makes up less than 7% of oil demand, is expected to continue to grow until 2050 as no viable oil substitution technology exists.
The gradual introduction of bio-jet fuel will limit pure kerosene jet fuel demand growth but will not affect the strong upward trajectory in aviation through 2050, unless a viable alternative technology is introduced.
Other sectors (agriculture, energy own use, own energy use, industry, buildings, and power generation) continue a downward sloping trajectory. Growing agriculture and energy own use demand partially offset the accelerated decline of oil consumption in power.