Fuel oil and gasoline consumption will shrink within a decade, while demand for naphtha, and to a lesser extent, diesel, will be booming, predicts consultant.
Global oil demand growth will slow to a crawl and gasoline use will peak within the next decade, prompting the world’s biggest energy companies to accelerate the shift to natural gas and chemicals, according to consultant Wood Mackenzie.
Oil consumption will keep expanding until at least 2035 as the petrochemical industry makes up for the contraction in some transport fuels, Wood Mackenzie said in a report on Monday.
There’s also natural gas, used in power plants and increasingly trucks and ships. In a sign of the growing importance of this less carbon-intensive fuel, the Oil & Money conference, a gathering of hundreds of industry executives that celebrates its 38th year on Tuesday in London, will open with a full day devoted exclusively to gas.
"The issue for Big Oil is how companies position themselves in a fairly quickly moving landscape," Ed Rawle, Houston-based chief economist at Wood Mackenzie, told Bloomberg. Oil is unlikely to drive long-term growth but "gas supply remains relatively robust through 2035, and is a growing focus."
The prospect of peak oil demand is hotly contested in the energy industry. Some companies, including Shell and BP, anticipate it happening between 2025 and 2040. Others, such as Exxon Mobil and Chevron still forecast decades of uninterrupted growth.
By 2035, the expansion in oil demand will be “minimal compared with what we have seen over the past 20 years," Wood Mackenzie said in the report. Consumption will have reached a plateau in regions including Europe, the US, China and Japan. Only India and some other parts of Asia, Latin America, Africa and the Middle East will still be growing, the consultant said.
Wood Mackenzie said the prospect of an eventual peak in consumption is "very real", but presented a nuanced view of what will become a multi-speed market. Fuel oil and gasoline consumption will shrink -- the latter in part due to the growing popularity of electric vehicles. Demand for naphtha, used as a feedstock in the petrochemical industry, will be booming. Diesel consumption will rise too, but at a slower pace.
"The petrochemical sector is one of the few bright spots for oil demand," Wood Mackenzie said, forecasting that this industry will increase its consumption of oil feedstock by 50 percent from 2017 to 2035.