The World Still Needs Hundreds Of Billions Of Barrels Of Oil

Has peak oil demand already come and gone? That’s an exceptionally hard question to answer. There are some experts that say unequivocally, yes. They claim that peak oil is already upon us, thanks to the crushing blow that the Covid-19 pandemic dealt to global oil demand as well as the ever-escalating worldwide transition toward clean energy. But there are just as many who say that the world’s thirst for oil still has a long way to go before we hear its swan song.

Regardless of whether oil demand has peaked or plateaued during the pandemic, what is undeniably true is that the world is going to burn a whole lot more oil in the future before the global community is able to decarbonize entirely - a goal that is still a long, long way off, no matter who you ask.

“The world is expected to burn hundreds of billions of barrels of oil in the coming decades,” Bloomberg Markets reported this week. “That gives plenty of incentive for giants like Total or Royal Dutch Shell Plc, plus the hundreds of smaller explorers that remain in business, to keep searching the world’s frontiers for the next place to sink their drill bits.”

Indeed, French supermajor Total SE is expected to get approval for a new multibillion-dollar project over the coming weekend that would drill into as yet untapped oil fields in Uganda and Tanzania. Total’s East African venture will cost around $5.1 billion and involve drilling along the shoreline of Lake Albert in Uganda, as well as constructing a 1,443-kilometer (897-mile) heated pipeline to deliver the extracted waxy crude to Tanzania’s port of Tanga, from where it will be exported.

This is an alarming bit of news for environmentalists and advocates of “keeping it in the ground.” Back in 2015, a peer-reviewed empirical study published in the journal Nature found that in order to avoid the worst effects of climate change, at least 80 percent of the known fossil fuel reserves in the world would have to remain unextracted. (That figure includes over 90 percent of U.S. coal and a full 100 percent of arctic oil and gas reserves).

So far, that stance has remained relatively relegated to environmentalist spheres. To date, BP Plc is the one and only oil major that has explicitly acknowledged the end of the oil era, conceding that demand growth will no longer be the norm in the very near future. “The rest of the industry still expects at least another decade or so of demand growth before the global need for oil maxes out,” Bloomberg Markets reports. “And even BP’s less bullish outlook shows a world where a lot more petroleum will be used.” According to BP’s “business as usual” model, in which oil demand stays steady and there is little or no progress to reduce the industry’s carbon emissions, an additional 1.1 trillion barrels of oil will have been consumed in the next 30 years, by just 2050.

The good news is that some of the carbon produced by the combustion of all those fossil fuels in the coming decades can be offset or captured. With concerted combined efforts from the public and private sectors to scale up carbon capture initiatives, the oil industry’s contribution to the global carbon footprint can be lessened to some degree in the time between now and the long-term goal of 100 percent renewable energy. What happens in the world’s energy industry this decade is of utmost importance for the world’s overall ecological future. Accepting that oil won’t disappear overnight will be an important part of making sure that we navigate away from our current course toward the most severe effects of climate change.

By Haley Zaremba for Oilprice.com