The Heritage Foundation Tells Rigzone Oil Demand Will Never Peak

In an exclusive interview, Diana Furchtgott-Roth - Director, Center for Energy, Climate, and Environment, and The Herbert and Joyce Morgan Fellow in Energy and Environmental Policy, at the Heritage Foundation - told Rigzone that oil demand will never peak.

“The world will continue to demand more and more oil as countries get richer and demand for energy rises,” Furchtgott-Roth said.

“Peak oil is a myth originating with King Hubbard in the 1970s. It’s been disproved,” the Heritage Foundation representative added.

“Oil demand keeps going up and recoverable oil resources rise too, as technology improves and we have horizontal drilling and fracking,” Furchtgott-Roth continued.

In another exclusive interview, Benjamin Zycher, a Senior Fellow at the American Enterprise Institute (AEI) told Rigzone that he sees no reason to believe that global consumption of fossil fuels will reach a peak anytime over the foreseeable future. 

“Fossil fuels will continue to be the efficient form of energy in most applications, the subsidies needed to make unconventional energy ‘competitive’ are not sustainable, and the unreliability and other adverse characteristics of unconventional energy means that they cannot satisfy soaring energy demands anywhere, Africa and the less-developed world in particular,” Zycher said.

Another Senior Fellow at the AEI, Michael Rubin, told Rigzone in an exclusive interview that, “if you’re talking big picture, fossil fuels aren’t going anywhere”.

“It’s easy to say oil and gas are the worst, until every other option is considered. In reality, however, gas and oil are becoming more efficient, cleaner, and are necessary to power the world,” Rubin added.

Jamie Webster, a Non-Resident Fellow at Columbia University’s Center on Global Energy Policy, told Rigzone in an exclusive interview that peak demand is highly uncertain.

“While many public organizations seem to be centering on around 2030, this belies the uncertainty that still exists around this,” he said.

“My view is it will occur sometime between what the IEA and OPEC expect (Before 2030 and after 2045 respectively). The bigger issue is not when the peak is, but what the shape of the demand curve is afterwards,” he added.

In another interview, Diego Hernandez Diaz - a partner at Mckinsey & Company who is leading the organization’s global energy perspective work this year - told Rigzone that, “across the four bottom-up energy transition scenarios explored in McKinsey’s Global Energy Perspective 2023, we see peak oil demand between 2025 and 2030”.

“In the long-term, our analysis shows that decline in oil demand would mostly be driven by its decline in road transport. Demand in the light-duty segment would decline across all scenarios as the proportion of EVs among cars on the road reaches between 55 and 80 percent by 2050, contributing to a decline in oil demand by 2050 of between 15 and 25 million barrels per day,” he added.

“On the other hand, our analysis shows that oil could still provide considerable supply to end-use sectors, such as aviation and chemicals, where decarbonization options, such as sustainable fuels, are not yet cost competitive in many cases, or where oil is used as a feedstock instead of as a fuel,” he added.

“In fact, chemicals and aviation are the only sectors where demand continues to grow to 2050 in all our bottom-up energy transition scenarios, driven by increased demand for plastic and travel, respectively. These sectors could account for almost 50 percent of global oil demand by 2050 (compared to around 22 percent today),” he continued.

Diaz told Rigzone that the short term is where the company sees the most uncertainty, “with recent record oil demand one of many factors we’ll be taking into account as we prepare our Global Energy Perspective 2024 for release this Fall”.

In a research note sent to Rigzone by the JPM Commodities Research team last Wednesday, J.P. Morgan analysts said global oil demand averaged 103.5 million barrels per day month to date through July 17, “rising by 1.6 million barrels per day over year-ago levels, and marginally below our published estimates”.

“Year to date, global oil demand continues to track 1.33 million barrel per day growth compared with our November projections of a 1.6 million barrel per day ga​in,” the analysts said in that note.

In its latest short term energy outlook (STEO), which was released earlier this month, the U.S. Energy Information Administration (EIA) projected that global petroleum and other liquids consumption will average 102.91 million barrels per day in 2024 and 104.68 million barrels per day in 2025.

In its previous June STEO, the EIA forecast that global petroleum and other liquids demand would come in at 102.98 million barrels per day in 2024 and 104.51 million barrels per day in 2025.

The EIA’s July STEO put 2023 global petroleum and other liquids consumption at 101.80 million barrels per day and its June STEO put global petroleum and other liquids demand at 101.90 million barrels per day.

“We forecast that global consumption of liquid fuels will increase by 1.1 million barrels per day in 2024 and 1.8 million barrels per day in 2025,” the EIA said in its latest STEO.

“Most of the expected demand growth is from non-OECD countries. In 2024, consumption of liquid fuels by non-OECD countries increases by 1.2 million barrels per day, offsetting a small decline in OECD, particularly in Europe and Japan,” it added.

“In 2025, non-OECD consumption rises by 1.4 million barrels per day, mostly in China, where we expect consumption will increase by 0.4 million barrels per day, and India, with a 0.3 million barrel per day increase,” it continued.

“We expect OECD consumption rises by 0.4 million barrels per day, led by consumption growth in the United States,” the EIA went on to state in its latest STEO.

To contact the author, email andreas.exarheas@rigzone.com