Global oil outlook to 2050
This report outlines our view on oil product demand to 2050, and explains the major trends that we see shaping the demand outlook over the coming decades.
Global oil outlook to 2050
Peak, decline and plateau
Since the 1960s, demand for oil has grown consistently in line with global GDP at a rate of around 1 to 2 million barrels per day each year.
The future is likely to look very different to the past, however, as new technologies disrupt demand for oil products in key sectors. This report outlines BloombergNEF’s view on oil product demand to 2050, and explains the major trends that we see shaping the demand outlook over the coming decades.
Contents
Key disruptors
Sector outlooks: road fuels, aviation fuels, chemicals
Road fuels are hit hard, but impact of electrification is not apparent until 2030s
Road fuels – gasoline and diesel – have been the most important driver of oil demand historically, and the future trajectory for road fuel consumption shapes the overall outlook for oil demand. By far the biggest driver of the change in road fuel demand over the coming decades is the uptake of electric passenger vehicles (EVs), which grow to represent 28% of all car sales globally by 2030, and 73% by 2050. By 2050, 54% of the global passenger car fleet is electric. Demand for road fuels will continue to increase for another decade, with peak gasoline demand in 2030, and peak road diesel demand in 2033. EVs and other alternative drive trains subsequently erode 19 million barrels per day (m b/d) of demand by 2050, but the rate of displacement begins to fade in the 2040s as the increase in EV penetration slows as saturation points begin to be reached in major markets.
Road fuel demand outlook Year-on-year growth in road fuel demand
Increases in vehicle efficiency shape the near-term demand trend, with year-on-year growth slowing to below 1% by 2028, before peaking in 2031. As the uptake of EVs accelerates, road fuel demand falls, declining by over 1.2m b/d each year by 2040. Gasoline is hit much harder than road diesel, accounting for around two-thirds of the overall decline in demand to 2050.
Road fuels currently account for almost half of refinery output, with gasoline and road diesel being key drivers of downstream margins and profitability. As demand for road fuels shrinks, so will the relative share of gasoline and road diesel in the ‘refined product slate’, with production yields falling to 12% and 16% of the barrel respectively. Conversely, as demand for jet fuel and chemical feedstocks climbs, their combined share of the product slate grows to 32% by 2050, up from only 14% today. This shift will require a significant reconfiguration of the global refining system, and will favor integrated processors in low-cost regions over less-flexible higher-cost producers.
Demand outlook by product and implied refined product slate to 2050
Aviation and chemical feedstocks become the only segments to grow post-2035
As road fuel demand peaks and declines, aviation fuels and petrochemical feedstocks become the focal point for long-term growth in oil demand. Continued growth in passenger air travel, and the absence of economically viable and scalable low-carbon aviation fuels, causes jet fuel demand to increase by an average 2.1% per year out to 2050. Similarly, demand for plastics and petrochemicals is expected to significantly increase. We see demand for naphtha and propane increasing by 1.7% per year out to 2050, but for consumption to peak in the late 2040s as circular economy trends eat into demand for primary petrochemical feedstocks.
End-use sector oil demand outlooks
Demand: Peak, decline and plateau
Demand for oil peaks in 2035, but significant investment in new production will be needed
Aggregate demand for oil products peaks in 2035 at around 107m b/d, declining by 10% out to 2050 to 96m b/d. From the peak in 2035, the destruction of demand accelerates to -1.3m b/d per year in 2041, but the rate of decline then begins to slow, falling to less than -400k b/d in 2050. The reason for the slowdown in the destruction of demand for oil is the shape of the outlook for road fuels. We expect the rate of penetration of electric vehicles (EVs) and other alternative drive trains to begin to slow as saturation points begin to be reached in major markets in the 2040s. This causes the decline in the demand for road fuels to begin to slow, which coupled with continued growth in demand for jet fuel and chemical feedstocks, leads oil demand overall to plateau by 2050.
Demand outlook by sector and year-on-year change
A key question for future upstream oil investment is how much new production will likely need to be brought online as demand for oil peaks and begins to decline. Demand growth is set to slow to less than 1m b/d per year by 2027, turning negative from 2036. Importantly, declining demand must be set against the decline in the level of production over time from existing oil and gas wells, which historically has been on average around 3-4% per year. We make a set of conservative estimates that U.S. shale production from existing wells declines initially at 20% per year, falling to 7.5% per year after 10 years. For all other global production, we assume a natural decline rate of 1.5-3.5% per year. This analysis concludes that 55m b/d of additional production will need to be brought online by 2050, equivalent to what global demand for oil was in the mid-1980s.
Demand outlook versus production from existing and new oil wells
2 degrees is a pipedream without transformative policy to overhaul key oil consuming sectors
Assuming a carbon budget in line with a scenario where the increase in average global temperatures is limited to 2 degrees Celsius above pre-industrial levels, we have applied a number of assumptions for the accelerated uptake of alternative technologies, such as electrification, hydrogen, biofuels, and plastics recycling in key oil-consuming sectors. The resulting ‘Climate Scenario’ concludes that oil demand would decline to below 20m b/d by 2050, but that this decline would be predicated on a wholesale transformation of all major oil-consuming sectors, which would require massive, sustained support from governments.
Oil demand in the base case outlook versus the NEO climate scenario
Oil & Gas transition scores
Companies in the Oil & Gas sector face increasing pressure from investors over their contribution to climate change, their draw on natural resources, the health and safety of workers and their impact on the communities and on biodiversity where they operate. These industries are also a critical link in the transition to a low-carbon economy. Environmental and social data can help clarify these issues and provide meaningful detail and key performance indicators to describe company sustainability performance.
2020 Bloomberg Transition Score
