IEEJ：February 2018○ｃIEEJ 2018
Special Bulletin
A Japanese Perspective on the International Energy Landscape (361)

February 5, 2018

An Analysis on “Peak Oil Demand”
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
A mainstream view on the future picture of energy has been that demand for oil as the world’s
largest energy source will continue to moderately expand over a long term on the strength oftransportation fuel demand growth induced by the diffusion of automobiles mainly in developing
countries against the backdrop of world economic growth. Amid the growing expectation andanticipation of a rapid diffusion of next-generation advanced vehicles replacing traditional internal
combustion engine vehicles, as symbolized by the rapid electric vehicle spread, however, thepossibility of sooner or later peak global oil demand has attracted global interests.
“IEEJ Outlook 2018,” released in October 2017 by the Institute of Energy Economics, Japan,
focused on analyzing peak oil demand, indicating that if zero-emission vehicles such as electric andfuel cell vehicles account for 30% of global vehicle sales in 2030 and for 100% in 2050, global oil
demand may peak around 2030 and fall back to the present level by 2050. It also provided ananalysis on the impacts of peak oil demand including oil price drops, their effects on oil producing
economies and carbon dioxide emissions, a falling gasoline share and its effects on the downstream
oil sector. I and my IEEJ colleagues have made presentations at various locations in the world tointroduce the IEEJ Outlook including the peak oil demand analysis, which has attracted deep
interest.
In any field, it is difficult to anticipate the long-term future picture. Various uncertainties areahead of us. Events or developments that cannot be anticipated at present could occur, leading
forecasts to frequently deviate from realities. As we accumulate discussions with oil experts andmarket players in the world on the difficult prediction of peak oil demand and various factors anduncertainties for consideration, we realize how difficult the prediction is. In this report, I would liketo introduce some key points for considering peak oil demand, based on my discussions at variousopportunities.
First, attention must be paid to various uncertainties regarding the expectation of advanced
vehicles’ rapid diffusion that has triggered interests in peak oil demand. In fact, the EV diffusion hasgained momentum on rapid battery technology improvements that have led to longer cruising ranges
and lower costs. The absence of carbon dioxide and air pollutant emissions during these advanced
vehicles’ driving has been attracting attention as well. Nevertheless, it is difficult to conclude thatEVs and other advanced vehicles are superior to traditional internal combustion engine vehicles interms of economy and convenience. Hopes are placed on further technology improvements and cost
reduction in the future. Attention must be paid to the point that their extent and speed are uncertain
as seen from various aspects including technologies and raw materials. Regarding the diffusion of1

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ｃIEEJ 2018advanced vehicles, there are problems involving key relevant infrastructure such as recharging
facilities and hydrogen stations. These social and economic problems beyond vehicle technologies
may also have to be taken into consideration.
A basically important point is how overall fuel efficiency for vehicles including traditional
internal combustion engine vehicles could be improved. Given the possibility that internal
combustion engine vehicles will continue to be sold and used and remain dominant, their fuelefficiency improvements will be a key factor for the future demand for vehicle fuels.
Another key point for consideration is how advanced vehicles would be used, whichevervehicles are selected, or whether their use would dramatically change from that at present. Not onlychanges in automotive power trains but also vehicle driving techniques and car sharing services
could alter how vehicles are used and have great influence on fuel and power demand. This is a new
problem linked closely to social and economic changes resulting from artificial intelligence andvarious information technologies that are rapidly advancing and attracting great interests. How thesewould change vehicle use is very difficult to measure quantitatively. Therefore, various possibilities
and scenarios may be combined with bold assumptions to quantify impacts on fuel and power
demand.
Furthermore, we must remember that the consideration of future vehicle fuels alone isinsufficient for analyzing peak oil demand. One of the arguments against the peak oil demand theoryis that overall global oil demand may continue increasing as oil demand growth in non-auto sectors
offsets a decline in vehicle fuel demand on the diffusion of advanced vehicles. Sectors expected tosteadily expand oil demand may include maritime and air transportation, and petrochemical
production. In these sectors, however, fuel efficiency improvements and fuel switching could berealized. Oil demand in these sectors in the future will also have great influence on the possibility ofpeak oil demand.
Given the above points, we find that various problems must be considered for analyzing thepossibility of peak oil demand. Depending on future developments involving these problems, future
oil demand will be depicted variously.
If oil demand peaks on the development of the abovementioned points for consideration,
however, the peaking may be brought about by a comprehensive set of various technological, socialand economic changes. A key point is that some major background factors could be required to“trigger” such comprehensive set of changes.
In the first half of the 1980s, global oil demand continued decreasing. A global recession after
the second oil crisis was a factor behind the oil demand decrease. Another key factor was thatmeasures to reduce dependence on oil were taken and produced effects in developed countries, thencentral oil consumers in the world. Given this point, the growing importance of air pollution andclimate change countermeasures could drive oil demand to peak out in the long run. The rapid
advancement and diffusion of some elemental technologies could alter the world. Another possible“trigger” of peak oil demand would be a crude oil price spike on large-scale oil supply disruptions inmajor oil supply regions such as the Middle East. These trigger events could prompt China, India
and other Asian emerging countries, viewed as the future oil demand growth driver, to take2

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full-blown measures to reduce dependence on oil. I would like to be alert to various events having
great influence on global oil demand.

Contact: report@tky.ieej.or.jp
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