Global oil demand projected to peak this decade

Oil demand is projected to peak in the next three to five years according to a report from global consultancy McKinsey & Company. 

The peak, which could happen as soon as 2025, is primarily driven by the uptake of electric vehicles (EVs) that’s grown by over 6 million globally since 2015. 

Coal, on the other hand, is projected to continue its downward trajectory after peaking in 2013 and a temporary rebound in 2021. 

The report also found power consumption is set to triple by 2050, as electrification grows and living standards improve. 

It’s predicted the global energy mix is going to see a shift towards low-carbon solutions, with hydrogen and synfuels playing a major role in power. 

Renewables will account for 50% of power generation globally by 2030 and grow to make up 80-90% by 2050, while growth in energy investments will rely almost entirely on renewables and decarbonisation technologies. 

As prices for oil and gas soar amid the war in Ukraine, it was discovered rapid technological developments and supply chain optimisation have halved the cost of solar and cut costs of wind by almost a third. 

This has resulted in 61% of new renewable power plants already being priced lower than fossil fuel alternatives.

Researchers also project hydrogen demand will likely grow by four to six times by 2050, as it becomes more widely used in the transport, maritime and aviation industries. 

However, despite government’s and corporation’s net-zero commitments, a growth in renewables and uptakes of EVs and decarbonisation technologies, the climate is still set to heat by over 1.7 degrees. 

To keep to 1.5 degrees, an acceleration of renewables and a shift towards energy efficiency, electrification and new fuels is required.

Christer Tryggestad, a Senior Partner at McKinsey, said: ‘In the past few years, we have certainly seen the energy transition pick up pace. Every year we’ve published this report, peak oil demand has moved closer. Under our middle scenario assumptions, oil demand could even peak in the next three to five years, primarily driven by electric-vehicle adoption.

‘However, even if all countries with net zero commitments deliver on their aspirations, global warming is still expected to reach 1.7°C. To keep the 1.5°C pathway in sight, even more ambitious acceleration is needed.’

Photo by Maria Lupan