By - Jim Vess

Oil demand will see a shift with transportation using less and petrochemicals using more, Barclays says

Energize Weekly, May 15, 2019

Global oil demand—under current economic and energy development trends—is projected to peak between 2030 and 2035 and then plateau through 2050, according to a new analysis by the London-based investment bank, Barclays.

That peak could come as early as 2025 if more aggressive energy policies highlighting renewable power and energy efficiency are implemented, the analysis said.

A scenario where alternative energy and efficiency initiatives slow or stall pushes the peak to 2040 with a higher consumption plateau to 2050.

In all the scenarios, however, oil continues to play a major role in providing energy and petrochemical feedstocks.

“Going forward, oil is likely to remain an important player in the energy mix: alternatives that provide the capacity to support growing populations and economies do not yet exist,” the report said. “But by 2050, the world will undoubtedly look different as advances in renewable energy, technological innovation and strict low-carbon policies help to ease the reliance on fossil fuels.”

Still, the Barclays analysis found that “the global energy system is not yet on a pathway to achieving the [Paris climate accord] pledge to limit the increase in global temperatures to 2 degrees this century, let alone the revised target of 1.5 degrees.”

“Immediate action on all areas including carbon pricing, energy efficiency, greater use of renewables, and electrification will be needed, requiring not only stricter policy enforcement but also a rapid change in consumer habits, with a significantly reduced reliance on fossil fuels such as oil, coal, and gas also a necessity,” the report said.

Over the past 20 years, oil demand has increased by 30 percent to 100 million barrels a day. In Barclays’ scenarios, 2050 daily demand could be between 70 million barrels and close to 130 million barrels.

Where that oil is being used will change markedly with less going to transport and more to petrochemicals, according to Barclays.

The world’s one billion cars consume some 22 million barrels of oil a day—about 22 percent of current global oil demand—making it the second largest consumer, after trucking.

Barclays projects that the share of oil used by passenger cars will slip by 2050 to 15 million barrels a day, 15 percent of total demand.

“The biggest driver of this change is not the rise of electric vehicles, but an improved efficiency of the internal combustion engine,” the report said.

Oil used in the power sector is also forecast to decline to fewer than one million barrels a day in 2050 from the present five million barrels a day.

The report sees oil demand for the trucking sector rising 22 percent by 2050 to 30 million barrels a day, with 97 percent of trucks currently powered by diesel or gasoline.

Barclays said it sees hybrids and electric engines making some inroads, but internal combustion engines still accounting for around 74 percent of the fleet in 2050.

For other oil-powered transport, there does not yet appear to be comparable fuel savings. Consumption of jet fuel is forecast to grow to nine million barrels a day in 2050 from the present six million barrels a day.

The number of ships on the seas is expected to rise to 250,000 by 2050 from 100,000 vessels in 2016 and the demand for marine fuels to rise 25 percent to 5.1 million barrels a day.

The significant reduction in oil demand from the auto sector will be more than offset by a growth in the use of oil as a feedstock by the petrochemical industry as its demand will grow to 18.7 billion barrels a day in 2050 from the current 10.6 million barrels a day.

“Demand for petrochemicals has increased by more than 50 percent over the past 10 years and we expect the sector to remain a large user of oil in the next few decades—potentially overtaking cars in the 2020s or 2030s,” the analysis said.

The report noted increasing concern about plastics as a pollutant and calculates that if a complete ban on single-use plastics was put in place, it would reduce oil demand in the development scenario by six million barrels a day in 2050.

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