Oil Demand Peak Could Be Just 5 Years Away: Shell

Thursday November 3, 2016

Although most talk among oil producers revolves around what the cyclical highs and lows of demand will be, a Royal Dutch Shell Plc senior official this week turned the discourse sideways by stating that other forms of energy could cause world oil demand to peak in as little as five years, Bloomberg reports.

Simon Henry, chief financial officer for Shell, said in a conference call, "We've long been of the opinion that demand will peak before supply, 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."

Bloomberg notes that this view contrasts sharply with that of the competition, most notably Exxon Mobil Corp., which said in its annual outlook that "global demand for oil and other liquids is projected to rise by about 20 percent from 2014 to 2040."

Spencer Dale, chief economist for BP, recently stated that an expected 20 million barrel per day increase in oil demand over the next 20 years will overwhelm "clean" technology such as the electric car, whose impact he thinks will not be fully realized until 30 to 50 years from now.

Shell's outlook is even considerably more aggressive than that of the World Energy Council, which pegs 2030 as the year petroleum use will reach its peak as renewable energy, electric cars, and other "disruptive" technologies take precedence.

But Henry stressed this doesn't mean Shell is going out of business anytime soon: "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.

"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."

As bullish as Henry seems about alternative power and oil consumption, in a company statement released Wednesday, Shell said it sees "oil and gas as being part of the energy mix for many decades to come."

For the time being at least, it's business as usual for the oil markets, with Alexandre Schneiter, CEO of Lendin Petroleum telling Bloomberg that he would like to see prices stabilize before his firm pays dividends to its shareholders.

He predicts further volatility in coming months but a market recovery in the long term – possibly with oil climbing to $55-$60 and even further, due to lack of investment by industry leaders.

Earlier this year, BloombergBusiness writer Tom Randall pointed out that electric car sales jumped 60 percent worldwide in 2015, and "if that level of growth continues, the crash-triggering benchmark of 2 million barrels [per day] of reduced demand could come as early as 2023."