Shell has predicted that oil production will peak in as little as five years, gradually being forced into decline by renewable energy sources and more efficient energy use in transport, reported Bloomberg.
Peak oil, a concept that has been around since the 1970s, predicts the time at which oil production will reach its zenith. Originally, the concept saw the peak as being brought about by the dwindling of reserves, despite high demand. However, continual new discoveries and improved production techniques have meant the oil has kept flowing long after some reserves were thought to have been depleted.
The difference with Shell’s latest prediction, is that peak oil will not be driven by dwindling reserves, but by dwindling demand, as the world moves to clean energy alternatives. The pace at which this transformation is taking places means that in as little as five years, oil production could begin to drop as demand flattens and starts to decline.
Speaking to Bloomberg, Simon Henry, CFO at Shell, said: “We’ve long been of the opinion that demand will peak before supply,
“And that peak may be somewhere between five and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.”
In 2015, additions to electricity generating capacity globally saw renewable sources account for more than half of all new installations in the year for the first time, overtaking fossil fuels’ long held lead.
Plus, a worldwide drive for efficiency, particularly in the transport sector will see demand start to dwindle even further in the near future. With the increasing adoption of electric cars and the IMO’s push for efficiency improvements and emissions reductions in shipping, momentum is already gathering in this sector.
Whether or not Shell’s prediction will be borne out by the facts over the coming years remains to be seen. It certainly isn’t the first time peak oil has been predicted, with American geologist M. King Hubbert predicting the peak in 1970, at which time American production did being to decline, only to be replaced by other sources elsewhere in the world, particularly in the Middle East.
Other oil majors such as ExxonMobil and BP do not share Shell’s pessimism, both predicting strong growth for decades to come.