[Oil Ending] Internal Combustion Engines Disappear... When Will the 'Peak Oil' Come?

Oil Consumption This Year Smallest Except During COVID Period
Electrification and Carbon Neutrality Accelerate Decline in Oil Demand
IEA "Crude Oil Demand to Peak Within Next Decade"

South Korea consumed a total of 533.09 million barrels of petroleum products from January to July this year. This is a decrease of 17.41 million barrels (3.1%) compared to 550.50 million barrels during the same period last year. Except for 2020, when the COVID-19 pandemic occurred, this is the smallest consumption volume since 2016, when consumption first exceeded 500 million barrels during the same period.

Naphtha consumption, which accounts for half of the domestic petroleum product consumption, decreased by 6.1%, from 264.09 million barrels last year to 247.74 million barrels this year. With forecasts predicting continued sluggishness in the petrochemical market until the end of the year, there is a high possibility that domestic petroleum consumption, which briefly recovered after COVID-19, will decline again.

Not only domestically but also globally, petroleum product demand is expected to reach a historic peak soon. Various factors such as economic conditions and inflation affect petroleum consumption, and recent rapid electrification of internal combustion engines and transition to carbon-neutral energy are analyzed to accelerate the timing of this peak.

There is a long-standing debate in the petroleum industry about "Peak Oil." It refers to the point at which oil production reaches its maximum and then begins to decline. This concept was first proposed by American geologist King Hubbert in the 1950s.

He claimed that U.S. crude oil production would peak in the 1970s and then decline, and as oil production decreased as he predicted, his theory gained credibility. However, with continued exploration and extraction technologies such as shale gas, oil production has continued, delaying the arrival of Peak Oil.

Even if oil production continues to increase, scenarios have emerged predicting that consumption will decrease in the future. The International Energy Agency (IEA) forecasted in its June report "Oil 2023" that global crude oil demand will peak before 2030.

Global oil demand, which exceeded 100 million barrels per day, hit a low of 91.7 million barrels per day in 2020 due to the COVID-19 impact. This year, it is expected to recover and exceed 100 million barrels per day again. The IEA expects steady growth to 105.7 million barrels per day by 2028.

However, the increase in demand is expected to sharply slow down from 2.4 million barrels per day this year to 400,000 barrels per day in 2028. The IEA explained that this phenomenon is due to countries adopting clean energy transition policies in response to the energy supply crisis caused by Russia's invasion of Ukraine.

[Image source=Yonhap News]

Additionally, due to the expansion of electric vehicle adoption and improvements in fuel efficiency, crude oil consumption in the transportation fuel sector is expected to peak at 4.53 million barrels in 2025 and then decline from 2026 onward. The U.S. and Europe are accelerating the adoption of electric vehicles. A representative example is U.S. President Joe Biden’s plan to increase the share of new electric vehicle sales to 50% by 2030.

Fatih Birol, IEA Executive Director, wrote in a Financial Times op-ed that "Without new climate policies, the current policies of governments worldwide indicate that demand for fossil fuels such as oil, gas, and coal will peak within the next few years," adding, "Especially the growth of electric vehicles in China means that oil demand will peak before 2030."

The Organization of the Petroleum Exporting Countries (OPEC) made a similar prediction. In its "Monthly Oil Market" report released on the 12th, it forecasted that the increase in global oil demand this year will reach 2.44 million barrels per day but will decrease to 2.25 million barrels per day in 2024. British oil company British Petroleum (BP) also projected that global oil demand will peak between 2035 and 2050.

Professor Yoo Seung-hoon of Seoul National University of Science and Technology said, "While advanced countries increasing electric vehicle and renewable energy adoption will see a decline in oil consumption within 10 years, consumption will continue to increase in developing countries," adding, "Considering the necessity of petrochemical products made from oil and aviation demand, which is difficult to replace with batteries, the peak in oil demand is expected after the mid-2040s."

As international oil prices continue their high-flying trend, reaching the highest levels of the year, oil prices are displayed at a gas station in downtown Seoul on the afternoon of the 19th. [Image source=Yonhap News]