Could Peak Oil Demand Be Just a Dozen Years Away?

Quantum leaps in electric vehicle technology are causing some analysts to revise their estimates of when we’ll no longer crave so much crude.

January 26, 2018


People have been talking about peak oil for more than half a century. But the phrase doesn’t necessarily mean the same thing now as it did back in 1956, when M. King Hubbert, a geologist working for Shell Oil, coined it.

For many decades, peak oil meant only peak oil supply. It referred to some date in the not-too-distant future—represented as the top of a bell curve—when the maximum rate of extraction had been reached in a given locale: a region, for instance, or a nation, or even the entire planet. After peaking, according to Hubbert’s theory, production would then begin to decline with cold, parabolic inevitability until we eventually managed to suck the very last drop of extractable oil from the ground.

Analysts and economists still use the phrase in this way, of course. But more recently, with oil production breaking records in both the United States and abroad, they’ve begun talking about a new kind of peak: oil demand. In this very different type of forecast, oil production doesn’t necessarily begin to decline at a particular point. But our need for it does. And it’s not just a theory: Experts on all sides of the issue say that it’s really coming. At some point over the next 25 years, a number of cultural, political, and technological factors will combine to slake our global thirst for this once most essential of fossil fuels. After decades spent planning for scarcity, oil companies are now busily preparing for something that they never saw coming: their own marginalization.

So, what are the various factors leading to a worldwide reduction in oil demand? Culturally and politically speaking, the awareness of carbon’s causal role in climate change has precipitated a global effort to reduce emissions from the burning of fossil fuels—including policies that tighten emissions standards, tax carbon pollution, promote efficiency, and reward investment in clean, renewable energy. These policies, collectively, have been the single biggest contributor to oil’s impending decline.

But another factor—technology—is pulling ahead of the pack. For quite some time now, oil companies and OPEC producers have held out the year 2040 as the consensus date for peak oil demand, give or take a few years. To many forecasters, that appeared to be the point on the calendar when all of the different factors would converge to make oil manifestly less attractive than other fuel sources. On January 19, however, a new report issued by analysts from Bank of America Merrill Lynch set energy-sector tongues wagging by moving the date up a full decade. The way the report’s authors see it, a significant technological development already on the horizon will “start to erode [the] last major bastion of oil demand growth in the early 2020s and cause global oil demand to peak by 2030.”

That development? Electric cars.

Or more specifically, I should say, the surprising speed with which electric vehicles (or EVs) are being built, improved, streamlined, and brought into the marketplace. More than 60 percent of the oil consumed throughout the world is used for transportation. Along with international efforts to curb emissions through pacts and policies, the surge of R&D for EVs—in conjunction with a global string of moratoriums on gas-powered cars by 2040—is causing many experts to rethink their earlier projections about peak oil demand. The same Bank of America Merrill Lynch analysts who just predicted it would arrive in 2030, for instance, were predicting a date well past that only three years ago. But that was before it had become as clear as it is today that the world’s automakers are all feverishly competing with one another to develop a reliable, long-lasting, inexpensive EV battery that will adequately address range anxiety, perhaps the biggest consumer obstacle standing in the way of EV competitiveness.

They’re getting very, very close. The question now, in other words, is no longer whether they will be able to come up with such a battery, but who will come up with it first. Whoever wins has the chance to become the pioneering, market-dominating Henry Ford of the next automotive era.

Not everybody is so sure that peak oil demand is right around the corner, or that it even means what we think it means, for that matter. Researchers at the Oxford Institute for Energy Studies recently published a report of their own that declares (with pitch-perfect Oxbridgean haughtiness) that “the date at which oil demand is likely to peak is highly uncertain and not particularly interesting.” They believe that there are simply too many variables at work to accurately predict such a date; moreover, they maintain that once it does arrive, the essential role that oil production plays in the economies of so many nations suggests that these nations will do whatever they can to keep demand alive as they attempt to diversify their GDPs.

But even these same doubters recognize that a paradigm shift for oil—“from an age of (perceived) scarcity to an age of abundance”—is on its way. And if electric vehicles, which not long ago were viewed as cars that only oddballs drove, actually hasten oil’s exit from the world stage, they may end up being one of sustainability’s great Cinderella stories.

onEarth provides reporting and analysis about environmental science, policy, and culture. All opinions expressed are those of the authors and do not necessarily reflect the policies or positions of NRDC. Learn more or follow us on Facebook and Twitter.

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