Are we reaching the end of the Oil Age?
The Stone Age didn’t end because we ran out of stones. Similarly, innovation will end the oil age, as cheaper, cleaner, and better technology supplants it.
First, electric vehicles (EVs) will disrupt oil’s largest market. Big money is already being mobilised: Tesla and Nissan lead the field, but the UK’s £246m Faraday Challenge will add to competition, as will the EU’s recent €2bn proposal to create an Airbus for batteries. As it stands, UK oil imports will rise inexorably, but going 100 per cent EV by 2030 would cut our imports in half.
Second, the developing world will not adopt our oil intensive habits. Developing cities are already too polluted to support more dirty cars, while mobility-as-a-service models (like Uber) reward EVs’ much lower running costs.
Third, the geopolitics of oil is shifting rapidly. National oil companies now own the cheapest reservoirs, and their more innovative private counterparts, starved of cheap supply, are diversifying into solar and wind. Together, we are making oil obsolete.
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No, however we will see a transformation in how oil is used.
In 2017, global oil demand sits at 97m barrels per day, having grown by over one million barrels per day annually since 2000. Oil demand is dominated by the transportation sector, accounting for around 60m barrels daily, while the remainder is split across petrochemicals, commercial and industrial use, and even power generation in a few countries.
Oil demand across the developed world is projected to decline after 2020, due to increasingly stringent vehicle fuel efficiency standards and the rise of electric vehicles. However, economic growth in emerging economies, coupled with rising living standards, results in oil demand growth that outweighs the projected declines in the developed world.
Global oil demand is projected to continue growing for the next 20 years, but at a slower aggregate pace that is increasingly reliant upon the petrochemical sector.
A revolution in battery technology and electric vehicle production could introduce peak oil demand at some point, but the end of oil is not near.