World’s Second-Biggest Oil Company Thinks Demand May Peak in Five Years
Royal Dutch Shell, the world’s second-biggest oil company by market value, thinks demand for oil could peak in as little as five years.
“Oil, we’ve long been of the opinion that demand will peak before supply,” Chief Financial Officer Simon Henry said on a conference call Nov. 1. “And that peak may be somewhere between 5 and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.”
The World Energy Council has forecast that petroleum consumption will peak in 2030 if renewable energy and other disruptive technologies continue to improve rapidly. Michael Liebreich, founder of Bloomberg New Energy Finance, predicts the growth of electric vehicles and better fuel efficiency mean oil demand will peak around 2025 and decline in the 2030s.
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Shell will still be in business for “many decades to come” because it is focusing more on natural gas and expanding its new-energy businesses including biofuels and hydrogen, Henry said.
“Even if oil demand declines, its replacements will be in products that we are very well placed to supply one way or the other, so we need to be the energy major of the 2050s,” Henry said. “That underpins our strategic thinking. It’s part of the switch to gas, it’s part of what we do in biofuels, both now and in the future.”
Shell sees “oil and gas as being part of the energy mix for many decades to come,” it said in a statement Nov. 2.
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Shell bought BG Group for $54 billion this year in a move the company said was partly aimed at increasing its gas business. Gas made up about 48% of the company’s total production in the third quarter ended Sept. 30, according to data compiled by Bloomberg. UK competitor BP had 38% gas, including from units, in the period.
The anticipated increase in demand of about 20 million barrels a day over the next two decades will probably be big enough to overwhelm the impact of the electric car, Spencer Dale, chief economist for BP, said Oct. 11. Those vehicles will have a bigger impact in 30 to 50 years, although there’s a chance it could happen sooner, he said.
