Jun 14, 2023 - Energy & Environment

Peak oil demand "on the horizon"

Projected year-over-year global oil demand growth, select sectors
Data: IEA; Chart: Thomas Oide/Axios

The International Energy Agency sees global oil demand growth slowing "markedly" in coming years, with a peak "on the horizon."

Driving the news: The IEA's new five-year outlook sees worldwide use rising 6% to 105.7 million barrels per day in 2028.

  • But the pace of growth is expected to slow greatly (see above).
  • It's a window into the agency's thinking with energy markets being wildly turbulent for unpredictable reasons, i.e. COVID-19 and Russia's war on Ukraine.

Why it matters: The trajectory of oil consumption affects carbon emissions, investment strategies and geopolitics, among other things.

Zoom in: Petrochemicals used in plastics and other products are a major source of demand growth in the forecast. Aviation fuel is, too.

  • But demand for road transport fuels goes into reverse starting around mid-decade.

The big picture: Theories about "peak oil" supply once dominated energy economics discussions for decades but never came to fruition.

  • More recently, climate change has driven more attention to when demand might peak.

What they're saying: A rapid shift to a "clean energy economy" is driving the latest outlook, IEA head Fatih Birol said in a statement.

  • An oil demand peak is "in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance."

What we're watching: The supply picture, which the IEA says could "significantly tighten" in coming months. But the outlook improves during the wider analysis window that runs through 2028.

  • The Russia-Ukraine crisis has sped up "clean" energy investment and oil capacity.

State of play: The IEA sees markets "adequately supplied throughout our forecast period" — assuming recent increases in upstream investment are maintained.

  • The U.S. leads supply growth, though increases will slow after this year.

Reality check: Take all this with a grain — or boulder — of salt! Supply and demand are notoriously hard to game out.

  • And what happens after a peak — a plateau, a gradual decline, or a steep one — matters even more.
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