“Peak oil” will be a demand rather than supply phenomenon, says a UK engineering, management, and automotive consultancy.
Ricardo PLC says multiclient research its Ricardo Strategic Consulting unit began last June indicates global oil demand will peak before 2020 at no more than 4% above 2010 levels. The International Energy Agency estimates average 2010 oil demand at 88.2 million b/d.
IEA and most other market observers project growth in oil demand to extend well beyond 2020, although growth rates differ.
The Ricardo projection puts oil demand at 3% below 2010 levels in 2035. Accelerated increases in the use of first-generation biofuels could lower oil demand in 2035 to 10% below 2010 levels, the study says.
“Ricardo believes that there has been a general underestimation of the future impact of government policies to improve fuel efficiency and promote alternatives to oil,” the firm said in a press statement. “This will be the case everywhere, including, very importantly, in China, where although demand is projected to grow by nearly 60% in the meantime, the study assesses that a peak could be reached as early as 2027 before starting to fall back thereafter.”
Despite continued growth in the global vehicle fleet, “efficiency improvements in the internal combustion engine will more than offset the rise in fuel demand deriving from the increase in the number of vehicles,” according to the study.
The study says production of first-generation biofuels “may increase by 5-6 times over today’s levels without allowing for any additional contribution from advanced biofuels, whose prospects remain uncertain.” If crop yields increase at historic rates, it says, surplus conventional fuel crops will be sufficient “to displace a significant amount of fossil fuels.”
The study also expects the decoupling of prices for oil and natural gas to encourage substitution of oil by gas in stationary uses and vehicles.
And it expects suppression of oil demand in transportation fuels to be “far more pronounced in terms of gasoline demand than diesel, which will provide a supply-side challenge to the world’s refining business.”