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The prospect of peak oil demand is hotly contested in the energy industry.
The prospect of peak oil demand is hotly contested in the energy industry.

Slowing Demand Growth to Push Big Oil to Chemicals

Slowing Demand Growth to Push Big Oil to Chemicals

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 Ltd.
Major crude producers will have to adapt to significant changes in the coming years, but their businesses can grow. Oil consumption will keep expanding until at least 2035 as the petrochemical industry, which provides the building blocks to manufacture everything from plastics to pesticides, makes up for the contraction in some transport fuels, Wood Mackenzie said in a report on Monday, Bloomberg reported.
There is also natural gas, used in power plants and increasingly by trucks and ships.
"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, said in an interview. 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 Royal Dutch Shell Plc and BP Plc, anticipate it happening between 2025 and 2040. Others, such as Exxon Mobil Corp. and Chevron Corp, still forecast decades of uninterrupted growth.
By 2035, the expansion in oil demand will not have peaked but 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 be shrinking—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, albeit 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% from 2017 to 2035.
Despite their differences about when oil demand will peak, the world’s largest integrated energy companies are nonetheless preparing for the future, largely through a push to invest more in natural gas.

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