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Planning for Peak Oil

Oil prices recently closed at $74.29 per barrel of West Texas Intermediate crude, up 23% since the start of the year. Oil prices in 2018 have been driven higher by factors such as increased demand stemming from global economic growth and threatened supply in light of hyper-inflationary conditions in Venezuela and geopolitical concerns in Iran, notes John Eade, analyst and director of research and market strategist with Argus Research, www.argusresearch.com, a leading independent Wall Street research firm.

The Argus forecast for the average price per barrel of oil in 2018 is $67, which compares to $51 in 2017, $43 in 2016, $49 in 2015, $93 in 2014 and $98 in 2013. We expect prices to rise toward $80-$85 on average in 2019. But we don’t expect prices to rise indefinitely, given the advancements of alternative energy sources such as wind, solar and hydro, as well as the expected growth of electric vehicles.

Peak oil is the forecast point in time at which the maximum level of petroleum demand is reached; after this peak, demand for oil is expected to enter terminal decline, though petroleum will still support industries such as heating, aviation and petrochemicals. The major integrated oil companies all have staffs of geologists and economists predicting the timing of peak oil. Here are their views:

  • BP plc (BP: BUY): BP estimates peak oil demand will occur around 2035.
  • Royal Dutch Shell (RDS.A: BUY): Royal Dutch Shell CEO Ben van Beurden has been quoted that peak oil demand could be reached in late 2020s or early 2030s.
  • ExxonMobil (XOM: BUY): XOM has indicated that oil demand may peak in 2040, if regulations aimed at limiting the impact of greenhouse gas emissions on climate are fully implemented.
  • Chevron Corp. (CVX: BUY): Recently retired Chevron CEO John Watson was quoted earlier this year as saying “there is no sign of peak demand right now.”

Independent energy consultant Wood Mackenzie in its long-term outlook sees oil consumption topping out around 2036. Norwegian energy consulting firm DNV GL has forecast that natural gas will surpass oil as the world’s largest energy source in 2026.


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