Has peak oil been and gone?

If I had of said to most of you reading this a year ago that 2020 would see negative oil prices, the world economy collapse and record highs in the stock market, you would have laughed me all the way to a padded cell. The same can be said for oil, in 2019 energy analysts had no concept of peak oil on the radar. Forecasts for oil demand destruction were almost nonexistence bar the improbable chance of a new technological innovation that would act like a meteor to fossil fuels as it did to the dinosaurs.

But here we are now with growing numbers of energy analysts forecasting that from here on out; oil demand is going to continue to decline. The most recent improvements in oil prices have been linked to the return to normality, driven largely by the introduction of a workable vaccine for COVID-19. But are we truly going back to the same economy that we had pre-pandemic? Would we even want that to happen? Probably not.

The pandemic has created permanent changes in people behaviors, the ability to work from home and subsequent reduction in travel and transport needs. But this isn’t the only price pressure that oil is facing over the next decade or two, batteries and the electric vehicle have seen increased popularity, especially with constant developments in battery technology. An it gets worse, recently the price parity milestone, the point at which batteries reach $100 per mile has been met by multiple manufacturers.

We can’t forget about regulation either, more and more restrictions are being added with many coming from multiple angles. Restrictions on internal combustion engine sales, financing restrictions for fossil fuel-based energy providers, tighter emissions protocol, the list goes on, even bans have been put in place in certain cities.

It all really comes down to timing, we can look to when coal, and natural gas switched the rains from the shift in price parity, or when whale blubber was phased out by vegetable oil, but 2020 is a year like no other.

So far estimates put a range between 2028 and 2040 with the most commonly applied date range in 2035 for oil to be surpassed by batteries. With estimates like this it certainly paints the picture that while oil prices are recovering, oil demand likely will never fully recover to the glory days.

Source: S.Dale, ‘Peak oil demand and long run prices’, pp-7

In the image above which has long since dated and doesn’t account for the doubling down on environmental factors as apart of the 2020 pandemic, we were already seeing forecasts that suggested peak oil demand was close. Today’s estimates shorten that timeline, with even the most bullish on oil being less optimistic over the longer term.

Only time will tell.