Oil demand to peak by 2035
12 Feb 2017 - 23:32
Despite electric cars spreading rapidly, oil demand would still rise because of rising prosperity in the developing world. An aggressive descaling of US Environmental Protection Agency’s (EPA) fuel efficiency targets past 2020 coupled with US administration's expected reduced support to EVs may push peak oil demand back to 2050, according to Bank of America Merrill Lynch (BofAML).
"Fast growth in EVs coupled with increased carpooling/sharing and autonomous driving may force peak oil demand by 2035", a BofAML research note said yesterday.
In the meantime, in its updated mediumterm oil demand forecast to 2022, BofML sees consumption expanding by 1.1mn b/d p.a. on average, driven entirely by Emerging Marks (EMs). BofML’s projections factor in a significant slowdown from the average annual 1.75mn b/d growth, it witnessed in 2015/16, as the transport demand effect of lower oil prices starts to fade.
The collapse in oil prices initially caused a shift in favour of larger and less fuel efficient cars like SUVs, from India to China to the US. Yet, the overall effect of the initial price drop on oil demand growth may fade materially in two years as short-term transport effects wear off and only long-lasting efficiency effects remain. A major risk to our positive view on oil demand to 2022 comes from a possible reversal of globalization, as oil fuels trade and transport.
Car penetration rates in EMs remains far behind Developed Market (DM) peers, leaving plenty of room for transport demand to grow for decades to come. Also the share of SUV sales in India and China remains lower than in the US.