- Major oil companies anticipate that global oil demand will plateau slowly rather than decline sharply, maintaining the need for continued oil and gas production for decades.
- Despite initial shifts towards renewables, European oil majors like BP and Shell have scaled back their green energy investments due to lower profits and have refocused on their core oil and gas businesses.
- US supermajors such as ExxonMobil and Chevron have consistently maintained that oil and natural gas will remain essential for global economic growth and development through 2050.
Big Oil firms expect global oil demand to stop growing at some point early next decade. But the decline will be very slow and gradual and will look more like a plateau than a downward spiral.
The world’s biggest international oil and gas companies have started to acknowledge that demand growth could slow or stop within a decade. But these firms keep pumping oil and gas more than they did earlier this decade as they expect that oil demand, regardless of a peak, isn’t going anywhere.
Big Oil’s Big Pivot
Despite the headline-grabbing surge in renewable energy capacity, solar and wind cannot replace fossil fuels in many industrial processes and production, while demand for petrochemicals drives increased oil and gas consumption.
The strategic shift of BP (NYSE:) and Shell (NYSE:) from early this decade to boost investments in renewables while scaling back oil production lasted only a couple of years. Europe’s Big Oil found out firsthand that the renewables business isn’t bringing the profits that the core oil and gas business is generating.
Faced with the difficult task of rewarding shareholders with attractive yields and payouts and stopping the investor outflow from the industry, and with an energy crisis with soaring oil and gas prices, Shell and BP drastically scaled back their ambitions in renewables and shifted their focus on oil and gas again.
Equinor of Norway, where electric vehicles hold an enormous market share and power comes from hydro and wind, also reduced investments in renewables, in order to boost returns for shareholders and adapt to an uneven energy transition.
The Norwegian major, which dropped ‘oil’ from its name and rebranded to Equinor seven years ago with more renewables business in mind, acknowledged that market conditions in the clean energy sector have changed, and the energy transition is going forward with an uncertain and uneven pace. At the same time, Equinor, which now produces a large part of the gas going to Europe via pipelines, expects to keep a high level of oil and gas production in Norway “all the way to 2035.”
“What we are working on is to make sure that we are able to squeeze every molecule out of the Norwegian continental shelf,” chief executive Anders Opedal told the Financial Times.
“So we have to drill around 100 wells a year for the next decade.”
Low returns from higher-cost renewables and the uncertain pace of the transition amid the push for security of supply have had European majors scale back plans and investments in renewables and look to grow low-cost lower-carbon oil and gas production.
In the U.S., ExxonMobil (NYSE:) and Chevron (NYSE:) didn’t have to pivot as they weren’t deep into renewable energy even before the 2022-2023 energy crisis and soaring prices.
Oil Isn’t Going Anywhere
Unlike the International Energy Agency (IEA), which has just doubled down on its forecast of peak oil demand by the end of this decade, Big Oil companies don’t see any peak by 2030. Some have put a peak at some point in the 2030s, but all say that oil and gas will remain essential for global economic growth and development in 2050.
“Under any credible scenario, and remain essential,” ExxonMobil says in its latest Global Outlook to 2050.
The U.S. supermajor also believes that “Lower-carbon technology needs policy support to grow rapidly but ultimately must be supported by market forces.”
In 2050, more than 50% of global energy demand will still be met by oil and natural gas, Exxon reckons.
“The world will be different in 2050, but the need to provide the reliable, affordable energy that drives economic prosperity and better living standards, while reducing greenhouse gas emissions, will remain just as critical as it is today,” it says.
Shell’s CEO Wael Sawan has said that reducing global oil and gas production would be “dangerous and irresponsible” as the world still needs those hydrocarbons.
In its 2025 Energy Security Scenarios, Shell sees oil demand likely to grow by 3?5 million barrels per day (bpd) into the early 2030s, with a long but slow decline after that as petroleum remains an affordable and convenient fuel, particularly in transport, and an important feedstock for the petrochemical industry.
In all three scenarios analyzed by Shell, upstream investment of around $600 billion a year “will be required for decades to come as the rate of depletion of oil and gas fields is two to three times the potential future annual declines in demand.”
In the most-discussed strategy reset this year, BP slashed spending on clean energy and boosted upstream investments.
The UK-based supermajor will aim for 10 new major oil and gas projects to start up by the end of 2027, and a further 8–10 projects by the end of 2030. Production is also expected to grow: to 2.3–2.5 million barrels of oil equivalent per day (boed) in 2030, with capacity to increase to 2035.
That’s a stark departure from BP’s previous strategy to lower oil and gas output by 2030.
“We will grow upstream investment and production to allow us to produce high margin energy for years to come,” CEO Murray Auchincloss said.
Whenever peak oil demand occurs, it will not be a steep downhill in global consumption—it will be a long plateau with a soft decline afterward, Big Oil says.
A steep drop could only occur if there is an aggressive political push toward net-zero emissions by 2050, Shell’s head of scenario planning, Laszlo Varro, told FT. But such a push would be “significantly outside society’s current comfort zone.”