Gasoline Projected To Reach Peak Demand By 2021

Demand for gasoline has been projected to reach its peak next year in the U.S. and as early as 2021 globally.

Analysts at Edinburgh-based consultancy WoodMackenzie say this will happen in the face of continuing growth in the vehicle fleet due to vehicle engine efficiency. The rising number of hybrid and electric vehicles being sold and higher fuel standards in the U.S. and Europe will contribute to the historic consumption shift.

The dramatic drop in oil prices during 2014 brought oil consumption to a record high last year, with 9.326 million barrels per day last year consumed in the U.S.

That will be changing in years ahead. An expected recovery in oil prices in coming years will be an important factor in demand growth diminishing, WoodMackenzie said.

Reaching that peak will have a huge economic impact eventually, with demand for gasoline in the U.S. accounting for 10 percent of global oil consumption; and global demand for gasoline representing a more than a quarter of the world’s oil consumption, according to WoodMackenzie.

The consulting firm thinks that improvement in battery technology will be a turning point.

“We expect gasoline engine efficiency to continue to improve through better deployment of batteries in hybrid vehicles,” WoodMac analyst Alan Gelder said.

The question of whether peak oil demand will be reached has been a hot topic of debate over the past decade by oil companies, regulators, economists, auto executives, and environmental groups. Oil companies and oil processors face a period of change as several nations, and a United Nations-backed plan, consider getting rid of fossil fuels entirely in the next 20 years or so.

Vitol, the world’s top oil trader, expects global demand for gasoline and diesel to peak in 2027-2028. Royal Dutch Shell predicts oil demand could peak in the 2030s.

The International Energy Agency expects oil consumption to grow in the foreseeable future, but at much slower rates.

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There are other economic and fuel consumption factors to consider. Growing vehicle sales and fuel consumption in Asia will play a part. Fuel efficient vehicle sales are expected to increase, but the global gasoline car fleet is expected to grow by more than 10 percent by 2025 to above 1 billion vehicles, WoodMac predicts.

“We still see global oil demand growing but the role of transportation shrinks,” WoodMac analyst Alan Gelder said.

WoodMac sees demand coming more form the petrochemical sector, with oil feedstocks going into plastics. Demand should also see an increase from the diesel and gasoil used in commercial transportation by buses, ships, and airplanes.

The study expects that overall consumption will see an historic drop.

“Traditionally we had (annual) oil demand growth north of 1 million barrels per day. We are transitioning over the next decade to growth of around 500,000 bpd a year,” Gelder said.


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