Executive Briefings

Shell Says Demand for Oil Could Peak in 5 Years

Royal Dutch Shell Plc, the world's second-biggest oil company by market value, thinks demand for oil could peak in as little as five years. Demand will peak before supply, says chief financial officer Simon Henry, and that peak will be driven by efficiency and substitution, more than offsetting the new demand for transport.

Shell Says Demand for Oil Could Peak in 5 Years

If renewable energy and other disruptive technologies such as electric cars continue their rapid advance, petroleum use will peak in 2030, the World Energy Council has forecast. Michael Liebreich, founder of Bloomberg New Energy Finance, predicts a peak in 2025 and decline in the 2030s.

"For the first time, oil companies have to think seriously about the future," said Alastair Syme, an oil analyst at Citigroup Inc. in London. Drillers that even a couple of years ago believed "every molecule of oil we produce will have a market," have come to realize they "can afford to bring on only the most competitive assets."

And yet, Shell’s outlook is at odds with some of its biggest competitors, who are still talking about decades of growth. Exxon Mobil Corp., the largest publicly traded oil company, 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.” Saudi Arabia, the biggest producer, with enough reserves to last it 70 years, has said demand will continue to grow, boosted by consumption in emerging markets.

Shell will be in business for “many decades to come” because it is focusing more on natural gas and expanding its new-energy businesses including biofuels and hydrogen, Henry said.

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If renewable energy and other disruptive technologies such as electric cars continue their rapid advance, petroleum use will peak in 2030, the World Energy Council has forecast. Michael Liebreich, founder of Bloomberg New Energy Finance, predicts a peak in 2025 and decline in the 2030s.

"For the first time, oil companies have to think seriously about the future," said Alastair Syme, an oil analyst at Citigroup Inc. in London. Drillers that even a couple of years ago believed "every molecule of oil we produce will have a market," have come to realize they "can afford to bring on only the most competitive assets."

And yet, Shell’s outlook is at odds with some of its biggest competitors, who are still talking about decades of growth. Exxon Mobil Corp., the largest publicly traded oil company, 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.” Saudi Arabia, the biggest producer, with enough reserves to last it 70 years, has said demand will continue to grow, boosted by consumption in emerging markets.

Shell will be in business for “many decades to come” because it is focusing more on natural gas and expanding its new-energy businesses including biofuels and hydrogen, Henry said.

Read Full Article

Shell Says Demand for Oil Could Peak in 5 Years