After fuelling the 20th century automobile culture that reshaped cities and defined modern life, petrol has had its day. The International Energy Agency (IEA) forecasts that global petrol consumption has all but peaked as more efficient cars and the advent of electric vehicles from new players such as Tesla Motors Inc. halt demand growth in the next 25 years. That shift will have profound consequences for the oil-refining industry because petrol accounts for one in four barrels consumed worldwide.
The cresting of petrol demand shows how rapidly the oil landscape is changing, casting a shadow over an industry that commonly forecasts decades of growth ahead. Royal Dutch Shell Plc, the world’s second-biggest energy company by market value, shocked rivals this month when a senior executive said overall oil demand could peak in as little as five years.
The IEA doesn’t share Shell’s pessimism. While the agency anticipates a petrol peak, it still forecasts overall oil demand growing for several decades because of higher consumption of diesel, fuel oil and jet fuel by the shipping, trucking, aviation and petrochemical industries.
The projections are part of the analysis the Paris-based IEA did for its ‘World Energy Outlook 2016’ flagship report. The agency forecast that petrol demand will drop to 22.8 million barrels a day by 2020 from 23 million barrels a day last year. By 2030, consumption will rebound slightly, reaching a peak of 23.1 million barrels a day, before falling again towards 2040.
The forecast is more pessimistic than the one released a year ago, when the IEA saw robust demand growth from now until 2030. Higher petrol and oil prices could help to cut demand growth.
Over the past two years, as petrol prices plunged, consumers have bought larger petrol-guzzling cars, particularly in the US, denting efforts to improve fuel economy. If prices rise, consumers are likely to opt again for more efficient cars.
Global petrol demand grew by nearly 20% between 1990 and 2015 despite competition from diesel in Europe, where the fuel benefitted from tax breaks. In the next 25 years, petrol consumption will drop 0.2%, according to the new IEA calculations. The biggest victims are likely to be refiners, which have spent billions of dollars over the past two decades to maximize petrol output at the expense of other fuels.