Ricardo Strategic Consulting and Kevin J. Lindemer LLC recently completed a study suggesting that the demand for oil may peak before 2020 and, by 2035, decrease to demand levels significantly below what was seen in 2010.
In fact, after incorporating a greater take-up of first-generation biofuels, demand for hydrocarbon oil may actually be more than 10% below 2010 levels by 2035, and oil's share of global energy demand could fall below 25% (from about 33% today).
‘The predominant role of oil in the global energy mix is facing an ever-greater challenge from a number of emerging trends,’ says Peter Hughes, managing director of the energy practice at Ricardo Strategic Consulting. ‘Over the past few years, a near 'perfect storm' for oil demand has been forming and gathering strength, created by a preoccupation in many quarters about the availability of future supplies.’
The study predicts significant changes in future demand patterns, strongly influenced by technology advancements, global energy security policies and demographics. Automotive technology, for instance, is evolving rapidly, with increasing powertrain efficiencies and a higher prevalence of pump blends of bio-ethanol.
When considering the outlook for biofuels, the study concludes that the food vs. fuel argument may be poorly supported. For much of the last three decades, the agricultural sector has been constrained more by under-investment than by supply. If crop yields increase at historic rates, there will be enough surplus conventional fuel crops to displace a significant amount of fossil fuels. And more than likely, the higher current selling prices will drive investment in production and research to further increase yields, making more sugar, starch and biomass available for conventional biofuels production.
As a result, the study projects that the production of first-generation biofuels may increase by six times over today's levels, without allowing for any additional contribution from advanced biofuels, whose prospects remain uncertain.