According to economists, chronic underinvestment in new oil supply since the 2015 Crisis, as well as pressure on oil and gas corporations to reduce emissions and even “keep it in the ground,” would likely lead to global oil production peaking sooner than initially projected. This would be a positive outcome for green energy proponents, net-zero agendas, and the environment if it weren’t for one simple fact: oil demand is recovering from the pandemic-induced dip and is on track to reach a new annual average record as early as next year.
Analysts have predicted that peak oil consumption will arrive sooner than envisaged just a few years ago, thanks to the energy transition and numerous government initiatives for net-zero emissions. However, global oil production may peak before global oil demand based on current oil and gas investment trends. By the middle of this decade, it creates a supply gap resulting in increased market volatility, price spikes, and potentially fundamentally higher oil prices. The problem with the world is that oil consumption is not peaking, despite wishful thinking, investment pressure, and other factors.
After the 2020 COVID Crisis, demand is increasing again. Contrary to early 2020 predictions that global oil consumption will never return to pre-pandemic levels, demand is only a few months away from reaching and exceeding those levels. Beyond the OPEC+ agreement, however, supply appears to be capped. Last year, new investment fell to a decade-and-a-half low.