For over 150 years, oil has been the fuel of economic and technological growth around the world. In 2005, OECD demand climbed to 50 million barrels a day. Several sources at the time declared the industry had reached peak production, however in 2013, OPEC’s figures told a different story. Production and reserves were at new record highs and in 2014 prices dropped sharply. Worries of peak supply were short-lived.

Now, talk of a peak demand has begun spreading in the oil industry. The recent Saudi Aramco IPO even included a forecast of peak oil demand in its prospectus. As with Aramco, the International Energy Agency (IEA) has predicted that global oil demand will plateau around 2030, with demand growth slowing after 2025. After over a century and a half of growth, it is predicted the oil industry will then enter a period of permanent decline.

As we’ve seen however, it is not so easy to predict the weather more than a few days in advance. The IEA’s projection of peak demand lies just a decade away, but it also happens to just be one factor that will influence the long-term pricing of black gold. Saudi Aramco’s IPO, for example, has raised a record $29.4 billion. The Kingdom even boosted the size of its public offering by an additional $4 billion as the IPO was so oversubscribed. Aramco’s market cap briefly touched $2 trillion, before settling around $1.85 trillion, making it the world’s most valuable company.

This is not necessarily what you would expect in an industry where peak demand has been predicted to only be a few years away. So, what is going on?

Of the 96 million barrels of oil consumed globally each day, about 60 million are used in transport. The IEA has said that while the current growth rate has been predicted to hold for the next five years, a combination of electric cars and fuel-efficient motors should reduce demand by roughly 13 million barrels a day. While electric cars are still seen as part of the luxury market, improved battery technology means a new fleet of options are now entering the affordable market. By 2040, battery electric vehicles are projected to form 50% of sales in Europe, making up about 20% of all cars on the roads in the region. In Norway, 42% of all new cars sold in 2019 were electric.

Global transport oil demand will therefore remain concentrated on aviation, where there hasn’t been as much progress in alternative solutions. Unless there are some extraordinary advances in technology, electric flying is unlikely to take off anytime soon. The industry continues to make huge strides in fuel efficiency, with recent engine models about 25-40% more fuel efficient than the aircraft they replace.

While transport demand could still peak around 2030, many still expect to see overall oil demand grow. Largely, this will be due to growth in the petrochemical sector, which produces the plastics, rubbers and synthetic fibers found in many ordinary items. Petrochemicals are the fastest growing sector of oil demand and demand for plastics has outpaced that of all other bulk materials, nearly doubling since 2000.

Furthermore, as demand structurally decreases for oil in developed countries (by about four million barrels per day by 2035), this is likely be far outstripped by demand in developing countries, where it could increase by up to 16 million barrels per day by 2035 (Wood Mackenzie report on peak oil). This will have implications for global oil markets, as they become more competitive, and economies adjust so they no longer rely solely on liquid fuel.