World oil demand could peak in 2020, study says

By Kris Bevill | November 11, 2011

A multi-client funded study recently conducted by Ricardo Strategic Consulting has found that global energy security policies and fuel efficiency technologies are likely to contribute to a peak in world oil demand at about 4 percent above current levels in 2020. By 2035, world oil demand is expected to decline to a level significantly below 2010’s demand of about 87 million barrels per day.

“The drivers working against oil demand growth are increasing in number and intensity, with the world’s consuming nations increasingly focused on their need to reduce their dependency on oil, supported by an ever stronger legislative framework,” Peter Hughes, managing director of Ricardo’s energy practice, stated. “Over the past few years a near ‘perfect storm’ for oil demand has been forming and gathering strength, created by a preoccupation in many quarters about the availability of future supplies.”

Fuel efficient technology and more stringent standards will play a significant role in reducing demand for petroleum, the study found. While the world’s vehicle fleet is expected to increase by more than 80 percent over the coming 25 years, the study found that efficiency improvements should more than offset the rise in fuel demand. Government policies related to fuel efficiency and alternative fuels have been underestimated, according to the report, including in China, where oil demand is projected to peak by 2027.

The study assumed increasing consumption of biofuels worldwide and found that the use of biofuels would strengthen the decline in fossil-based oil demand. However, even without considering the use of biofuels, oil demand is still expected to fall well below 2010 levels by 2035, said Kevin Lindemer, co-director of the study. Lindemer said current limitations to biofuels use, including vehicle engine tolerance, were considered in the research, but it was assumed that these issues would be overcome in time. “We treated them as issues that need to be addressed and changed,” he said.

The study also took into consideration the incorporation of other biofuels produced using sugars and starches over time as technologies become economically viable. “We weren’t assuming that biofuels are just ethanol or just biodiesel,” Lindemer added.

Ricardo’s research was funded by some of the world’s leading energy and technology companies and organizations. Comprehensive study results are for purchase at www.ricardo.com.