Editor OilPrice.com
Updated 5 min read
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Oil demand is set to plateau rather than drop off a cliff after it peaks, the International Energy Agency (IEA) predicted this week, citing “policy settings and market trends.” But here’s the thing about policy settings and market trends: they change.
That oil demand is set to peak before 2030 has been repeated ad nauseam by various forecasters, including, notably, Chinese energy majors Sinopec and CNPC. Indeed, OPEC is the only forecaster of demand that does not see it peaking anytime soon. Of course, OPEC is interested in its predictions panning out—but so is the IEA, a vocal proponent of the shift to electrification in transport and moving from hydrocarbon-fueled baseload generation to weather-dependent wind and solar, as are many governments of large oil consumers.
When the IEA cited those “policy settings and market trends” in its latest Oil Market Report and its Oil 2025 report, which came out together this week, it was that shift to EVs and the move to wind and solar that it meant as drivers of falling oil demand. But there are some challenges facing both assumptions.
A recent Shell-commissioned survey found that while existing EV owners tend to feel more confident about their vehicles, many prospective buyers remain hesitant—citing cost as a major barrier. “While current EV drivers are feeling more confident, the relatively high cost of owning an electric vehicle, combined with broader economic pressures, are making it a difficult decision for new consumers,” Shell’s VP for mobility and convenience, David Bunch, said, as quoted by Bloomberg this week.
China remains an exception, thanks to extensive subsidies and a highly competitive market that has driven down prices. However, even in China, this model may be reaching its limits. “It’s very extreme, tough competition,” an executive vice president of BYD (BYDDF, 1211.HK) told Bloomberg. “No, it’s not sustainable,” Stella Li added, referring to the current situation in China’s electric car sector. The most likely prospect is consolidation. And that may put a stop to the continuous decline in prices.
Despite this, many oil demand forecasts—including the IEA’s—still rely on projections of steady EV growth. But recent industry decisions suggest a more complex picture. GM (GM) announced it would invest $4 billion in expanding internal combustion engine vehicle production. Volvo (VOLCAR-B.ST) Cars, which reported strong EV-driven sales last year, saw a 12% drop in overall sales this May, in part due to underperformance in its EV segment. These developments reflect growing pains in the transition—not necessarily a reversal, but perhaps a recalibration of expectations.
