Goldman Sachs, IEA, OPEC Differ in Peak Demand Forecasts

Global oil demand is expected to continue its upward trajectory for another decade, with peak demand not anticipated until 2034, according to Goldman Sachs Research. Goldman Sachs attributes the extended timeline to sustained demand from emerging markets, particularly in Asia, and an increasing need for petrochemicals. The International Energy Agency (IEA) has a more optimistic approach, while OPEC’s forecasts extend beyond 2040.

"We think peak demand is another decade away, and more importantly, after the decade it takes to peak, it plateaus, rather than sharply decline, for another few years," states Nikhil Bhandari, Co-Head of Asia-Pacific Natural Resources and Clean Energy Research, Goldman Sachs, along with Analyst Amber Cai in the report. Goldman Sachs projects that oil demand will peak at 110MMb/d by 2034. In a scenario of slower electric vehicle (EV) adoption, however, it could continue to rise to 113MMb/d by 2040.

Goldman Sachs expects gasoline demand to peak by 2028, but overall oil demand will remain strong due to rising needs for other refined products like jet fuel and petrochemicals. As global incomes grow, demand for petrochemical products and air travel will increase, driving up the need for jet fuel into the late 2030s, with China being a major contributor to this growth. Despite improvements in aircraft efficiency and efforts to reduce carbon emissions, jet fuel demand is expected to keep rising.

The delayed peak in oil demand is largely due to the slower-than-expected adoption of electric vehicles (EVs). Factors like reduced subsidies in Europe, price competition, and technical challenges have slowed the growth of the EV market. However, EVs are still expected to significantly reduce gasoline demand by 2028. Meanwhile, demand for diesel is likely to increase until around 2034, as electrifying medium and heavy-duty trucks remains challenging. Hydrogen may start to compete with diesel for large fleet vehicles in the late 2030s, leading to a decline in diesel demand. Additionally, slowing investment in oil production could cause supply shortages as the peak in oil demand approaches.

Divergent Predictions, Uncertainties

Peak oil demand has been a topic of debate, with varying predictions from different organizations. Historical predictions of peak oil demand have often been proven wrong due to unforeseen economic trends, technological developments, and changes in government policies. IEA suggests that global oil demand will peak before the end of this decade, while OPEC forecasts that the peak will not occur until 2045.

According to Boston Consulting Group (BCG), growth in developing countries is likely to be the most significant factor in predicting future oil demand, driven by population increases and rising energy needs. Fossil fuels are the most dense, affordable, and readily available energy source, unless a large-scale global shift to alternatives occurs, explains BCG.

The future of oil demand will also be influenced by the rate of renewable energy rollout, improvements in energy efficiency, and economic factors. However, much of the efficiency gains have been achieved in mature economies, leaving significant potential for further improvements in developing nations. Matthew L. Wald, an energy expert, emphasizes the complexity of the energy transition, stating, "Clean energy is growing, but so is demand, and to meet it, dirty energy is growing too. We are going to have to do things differently if we hope to trim the output of climate-changing emissions."