Add Goldman Sachs Group Inc. to the list of forecasters calling for oil demand to peak sooner rather than later.
The bank brought forward its forecast for peak oil demand in the transportation sector by one year to 2026, if not sooner, largely due to the accelerating adoption of electric vehicles. Overall crude consumption will keep expanding this decade due to jet fuel and petrochemicals, but growth will be at an “anemic” pace past 2025.
Goldman is the latest to reevaluate what the end of demand growth will look like for oil. Among the most aggressive calls is that from BP Plc, which said last year that the era of oil demand growth may already be over, while the International Energy Agency has taken a more conservative view than BP, seeing demand plateau from around 2030.
“Government policies driving higher efficiency gains and lower emissions have had the strongest bearing on road transport demand,” Goldman analysts including Nikhil Bhandari and Damien Courvalin said in a report. “Petrochemicals will become the new baseload for oil demand, driven by economic growth and rising consumption, especially in emerging markets.”
Avoiding peak oil this decade largely comes as economic growth continues in emerging markets, while for developed markets, Goldman sees overall oil demand never returning to 2019 levels. The decrease in road transport demand, which accounts for 43% of overall oil consumption, is also being exacerbated by a shift toward permanent work-from-home behaviors in the wake of the pandemic, the report said.
Tightening emission targets in the U.S. and Europe are spurring the outlook for rising electric vehicle penetration, which if adopted at an even faster pace, could drive road transport demand to peak one year earlier than the bank’s base-case scenario. Meanwhile, significantly higher oil prices could also bring forward the peak for overall oil demand, the bank said.
For others in the oil and gas industry, the end of oil demand growth is still some ways off and fossil fuel will still be needed as countries work toward their environmental goals. Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield pegged peak consumption at 2035 during the BloombergNEF summit earlier this week.
While the future is one of lower carbon, oil continues to help fill the world’s robust energy needs and has remained essential even as the pandemic ravaged economies globally, said Bruce Niemeyer, vice president of strategy and sustainability at Chevron Corp.
“It’s a very big planet, with lots of needs around the world,” Niemeyer said at the summit on Wednesday. “As we work toward that lower carbon future, we have to be very thoughtful about the energy system today, its size and how it can evolve to be lower carbon and lower carbon for everybody.”