Have we already passed peak fossil fuels?

2019 remains the record year for fossil fuel consumption. Might it turn out to be the year fossil fuels peaked?

By Nick Ferris  energymonitor.ai 7 October 2022

Peak demand for horses in the US came in 1905; for gas lighting in the UK in 1907; for UK steam power in 1910; and for UK coal heating around 1960, according to the think tank RMI. Time and again, legacy energy systems have followed a pattern of rapid growth in consumption, followed by a plateau of a number of years, then a rapid decline. This last period is associated with falling prices, collapsing profits, stranded assets and companies going bust. The cost of capital rises for peaking industries, starving them of the ability to invest, and accelerating their subsequent decline. 

Environmentalists everywhere are waiting for the moment when fossil fuels will follow this pattern. The conditions are beginning to take shape: renewable power is now cheaper than fossil fuels in most countries. Last year, the cost of levelised electricity production from major renewable energ... compared with the year before, including onshore wind (down 15%), offshore wind (down 13%) and solar (down 13%). 

However, following the dip in energy demand during the Covid-19 pandemic, coal, oil and gas demand all rebounded considerably in 2021, with more gas consumed than ever before. Most energy analysts still maintain we are a long way off peak fossil fuels: S&P Global Commodity Insights’ most recent forecast pins 2038 as the year fossil fuels will peak, with peak coal coming in 2024, peak oil coming in 2035 and peak gas coming after 2050. 

Yet delve into the data a little deeper and it becomes clear we are not simply witnessing business-as-usual growth in fossil fuel consumption as the global economy recovers. 

Data from BP’s Statistical Review of World Energy shows Europe, the US, Canada and Japan – collectively responsible for the majority of the world economy and the majority of historic emissions – peaked fossil fuel consumption in the year 2005. The 163.9 exajoules (EJ) of coal, oil and gas consumed across those regions in 2021 was 14.6% below the 191EJ consumed 16 years previously. 

Economic growth in these wealthy economies has become more energy efficient and renewables have taken an ever greater share of the energy mix each year. In Europe, for example, solar and wind now provide 32.1% of electricity, compared with 10.6% a decade ago. These countries have set a clear example of what peak fossil fuels will look like – and many have also laid out comprehensive plans of how they aim to nearly fully eliminate them from the energy mix by 2050.

Following the coronavirus pandemic and renewed climate optimism around COP26 – which coincided with more than 90% of the global economy pledging to reach net zero by around mid-century – a number of more optimistic forecasts for peak fossil fuel have been released. 

Consultancy McKinsey & Company forecast in April of this year that global fossil fuel demand will likely peak before the year 2030. The International Energy Agency, meanwhile, said in October 2021 it believes fossil fuels will peak by 2025 if countries actually meet their stated climate pledges. 

RMI is even more optimistic. Research led by senior principal Kingsmill Bond finds the current record year for fossil fuel demand – 2019 – is likely to be the year global fossil fuel demand peaked. Bond believes we are at a plateau of relatively stable demand, before the inevitable structural decline. 

“There is no question that a structural shift is going on from fossil fuels to renewables,” says Bond. “The question is simply when is the peak of fossil fuels. 

“Country after country has seen peak fossil fuel demand, from Brazil to Thailand to South Africa. We calculate that 60% of the world saw peak fossil fuel demand by 2019.”

Data backs up Bond’s pronouncements. Global coal demand has plateaued since 2014, and with 40 countries pledging to phase out the fuel – which remains the world’s main source of electricity – and China, India and the US all now undertaking ambitious carbon reduction plans, it seems safe to bet that coal will likely never grow again.

Meanwhile, data from BP’s Statistical Review of World Energy shows that record oil demand occurred in 2019, with increased demand during the economic recovery of 2021 unable to top that. BP’s data shows that around half of the world’s oil market has already passed peak oil – and with electric vehicle uptake crossing a mass adoption tipping point in m..., it seems inevitable the oil market is on the precipice of structural decline. 

"Recent high oil prices, along with policy progress through programmes like the Inflation Reduction Act in the US, is likely to bring forward the date of peak demand for oil,” adds Andrew Logan from the US think tank Ceres. “Companies within the sector itself, from BP to Equinor, all anticipate peak oil demand arriving within a decade, and given the rapid pace of technological advancement, it is quite possible that peak demand will actually arrive sooner.” 

Predicting peak gas is a little more complicated: the fuel is half as carbon-intensive to burn as coal and still considered a ‘transition fuel’ in some quarters. However, sky-high gas prices over the past year and significant pressure on the global liquefied natural gas market, is leading countries to move away from gas more rapidly than they were anticipating just one year ago. 

“While there is a role for gas in the near term in displacing coal, longer-term it is too expensive, too volatile and too carbon intensive to play a major role in the energy transition,” says Logan. “While scenarios differ wildly in the role of gas to 2030 or even 2035, they are fairly unanimous that gas demand needs to decrease substantially thereafter if the world is to have any hope of achieving the goals of the Paris Agreement.” 

An economic inevitability

Were the world in a healthy economic place, it might be harder to confidently predict a drop in fossil fuel consumption. However, the sputtering global economy adds credibility to the theory that 2019 may have been the peak year for fossil fuel demand. 

Tumultuous global economic conditions triggered by all manner of factors – Covid-19, supply chain crisis, Brexit and war in Ukraine, to name a few – mean there is now a 98% chance of a global recession, according to a probability model run by economists at Ned Davis Research, a provider of independent investment research. After the 1973 oil crisis and 2008 financial meltdown, oil consumption fell 2%; after the 1979 oil crisis and 2020 Covid-19 pandemic, it fell by around 10%. It often takes several years for fossil fuel markets to recover from such a shock – but if such a shock were to take place right now, it is uncertain they would ever fully recover, given how much cheaper and more reliable renewable energy sources now are. 

Even if recession is avoided, it is widely accepted that much of the world is entering a period of low growth, which will in turn require less energy to power it. 

Every year that passes, an ever greater share of global energy growth is met by solar and wind capacity additions. Recent years have seen solar power consumption grow by an average of more than 20% each year, while wind power grows by 10–15% each year. If you overlook the shock to the energy supply recorded in 2020, and compare figures for 2021 to 2019 – the current record year of peak fossil fuel consumption – then total energy supply has grown by 8EJ, of which 7EJ is solar and wind and 1EJ is from other non-fossil fuels.

The trend of new renewables crowding out fossil fuels continues: the latest Global Electricity Insights report from the think tank Ember finds that the 3% global electricity demand growth recorded in the first half of 2022 was met entirely by renewables

No room for complacency

If peak fossil fuel demand has already happened, some significant economic headwinds could be on the way for many countries. Policymakers in the vast majority continue to plan for a future of increasing fossil fuel demand. Recent Energy Monitor investigations have shown that hundreds of billions of dollars of new gas infrastructure is being built across Africa and Asia, all of which poses significant stranded asset risk if a rapid decline in fossil fuel consumption is around the corner. 

Crossing peak fossil fuels also does not mean that the climate crisis is solved. Consumption of oil, gas and coal must decline to nearly zero by mid-century if the world is to have a good chance of limiting global warming to 1.5°C and avoiding the most catastrophic impacts of climate change. Market forces will likely ensure this decline takes place – but it will not happen quickly enough if those in power are planning for a different future. 

“We cannot leave this to markets alone: sure, current high prices are destroying fossil fuel demand and shifting investment decisions toward clean energy, but we cannot rely on a recession to bring down fossil fuel demand long-term,” says Lorne Stockman, co-research director from the NGO Oil Change International. “We need clear, decisive government action that ends support for fossils and guarantees support for renewable energy and energy efficiency – and we need clear plans for winding down the industry in a just and equitable way that supports workers.” 

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The short term pain in Europe may only accelerate the continents move to alternative energy sources.  The longer that fossil fuel cost stay high, the greater the incentive to reduce their use.  There is also the fact that the major non-US global crude suppliers are some pretty nasty and dangerous regimes that do not hesitate to support dictators like Putin and MBS.  NOPEC is becoming a thing.

It appears as though the "alternative" energy source right now is coal and they are definitely accelerating the move to it!!

Projections are some people will freeze to death this winter due to "alternative energy sources".  Bout the same as someone dying from thirst on Toledo Bend because the water is too dirty!!!

No country can tell China what to do.  And the fact that China is building coal fired plants has zero relevance for what the rest of the world needs to do.  The impact of climate change is not limited to a country.  It impacts the world.  Go ask all the south Louisiana home owners who can't afford flood insurance.  Many will not be able to get basic homeowner's insurance at an affordable price.  It's as bad if not worse in Florida.  A harbinger of the future for the entire Gulf Coast.

You have to read more than the title to know the point of the article.  It is a timeline projection.  It doesn't suggest peak anything other than coal "anytime soon".  That is quite plausible.  Here is the key sentence.

"S&P Global Commodity Insights’ most recent forecast pins 2038 as the year fossil fuels will peak, with peak coal coming in 2024, peak oil coming in 2035 and peak gas coming after 2050."

The "peaks" are the point where use begins to decline.  None of the energy sources "stops" in those years.

Making this a debate about geologic time inclusive of sea level change and historical climate data is fine as long as the correct time period is used.  Here is an example.

"The last time there was this much carbon dioxide (CO2) in the Earth's atmosphere, modern humans didn't exist. Megatoothed sharks prowled the oceans, the world's seas were up to 100 feet higher than they are today, and the global average surface temperature was up to 11°F warmer than it is now.

Anyone promoting the long term use of fossil fuels willfully ignores the preponderance of the science and ignores the climate disasters that are becoming a daily occurrence.  The fires and the storms are one example of weather events that have been with us throughout human existence but their frequency and strength are increasing.  Historic drought is causing huge water issues in the west and rising seas are threatening much more than just the problem with finding affordable home and flood insurance.

You can read similar opinions from many analytic companies that cover the industry.  The variations in timing each calculates are getting closer as time goes on.  Attempting to attack the source is part of efforts to defend the indefensible.  For future discussions on the topic, I suggest respondents should simply start out their posts by stating whether they are a climate science denier or a believer in the impacts on a warming planet.  Believers are not a monolith.  They vary in what they see as the impacts and the timing but they all believe we are far behind where we need to be in reducing GHG emissions.  As someone who represents clients who have royalty income, I can say that we are all concerned that the industry's obstinance in addressing emissions is likely to serve only in moving the whole timeline earlier and increase the risk of stranded assets.

EgiB:

Currently Europe is transitioning (albeit temporarily) to firewood and wood pellets.  Let’s hope peat and dung chips don’t make a comeback.

Hello, Dion.  I hope you are doing well.  Considering the stakes in Russia's invasion of Ukraine, short term use of whatever fuels get Europe through the Winter is acceptable.  I don't think that peat will be used.  We need it too much for Scotch Whiskey.  I am unaware of any current run on dung chips but if I notice one, I'll let you know.  Am I correct in thinking that a lot of those wood pellets are coming from the great state of Louisiana?

The horrible, misguided push away from fossil fuels should slow dramatically after November 8. 

Go ahead, RONNY.  You can say it.  I'm a climate denier.  It's okay.  It's just not an opinion based in reality.  Here is what I mean.  If Republicans gained a majority in either or both houses of Congress nothing would change regarding market forces, the opinion of financiers or the climate related legislation that has already passed Congress.  Any further efforts to boost renewables and energy efficiency by the federal government outside of presidential executive orders would cease for two years.  Republicans would not have a majority capable of overriding a Presidential veto.  So stale mate.  The market and the general public would continue their swing toward climate actions and investments based on a perception of the future.  The fossil fuel industry has a problem recruiting young workers because those young people see those jobs as not having a long term future. Banks and private equity have long ago foreseen a future where climate change makes fossil fuel related investments too risky and renewable energy is viewed as a good long term investment.  The American public believes in climate change by an increasing majority and any politician who does not take that into consideration will not have a length career except in the most extremely conservative districts.  Even those districts will become more climate conscious as they feel the effects of the changing climate.  Republicans would like you to think they can do something about the trajectory of American energy policy but they cannot.  I think most of them know that, they just hope you don't.

so, let’s all step back, and take a few deep breaths.  I read this article when Skip posted it, but I’ve had a long week, and now a long weekend (lots of football, and even more leaves in my yard that needed to be dealt with).

Climate Change is real, and the world needs to be doing more to prepare for it.  More on that below.

The article is interesting.  Frankly, I’m not worried about whether 2019, or 2022, or 2025 is “peak oil”.  I am curious about some of the cited sources, with which I am not familiar, but that’s okay.  I’ve spent the last 35 years working as an in-house counsel for some of the largest scientific research labs in the US, that cover everything from “dark matter” that fills up the universe to nuclear weapons.  I’ve learned, from many of my PhD clients, to ALWAYS question sources.  I will note that the author of the article that Skip posted was by a fellow whose prior job was with Greenpeace, an organization not necessarily noted for its objectivity and evenhandedness when it comes to the environment and fossil fuel companies.  But having said that, I don’t dismiss what he has to say.

Let’s assume that he’s right - that 2019 was peak oil.  There is an uncomfortable truth (did Al Gore use that term?) that the world needs, and can’t live without crude oil and natural gas, for at least years, and likely decades to come.  A more uncomfortable truth is that the world NEEDS crude oil and natural gas RIGHT NOW, and in greater supplies than are currently available.  I have friends who work at the Strategic Petroleum Reserve, and they are alarmed at how the current Administration is pumping down a reserve created for US emergency use just to try and lower the price of gasoline a few cents before the next election (TRUTH - SMOKE THAT, GREENPEACE).  And instead of increasing domestic production, we are going, on bended knee, to Saudia Arabia and Venezuela, and asking for more crude oil.  We aren’t going to the Permian Basin and asking for more oil, we are going to Venezuela.  Think about that for a moment.

Skip talks about a transition, and all that is true.  Timing is the issue.  Right now, we have government regulations being implemented based upon “wishful thinking”.  I didn’t come up with that phrase, but I wish I had - it is spot on.  Right now - this month, this year, and for the next few years, we can talk all we want about renewables, but we don’t have the energy storage technology or infrastructure to make “renewable” — “reliable”.  The only green energy that’s reliable is nuclear, and Germany is shutting down all of its nuclear power plants as fast as it can.  That will become a hugely regrettable decision for Germany.  And it takes decades to permit and build new nuclear power plants here in the US.

Now, as stated, we can’t control what China and India are doing about climate change - but, understand this:  what they do and don’t do absolutely affects all of the world.  The US and Europe can’t practically do enough to offset what China and India are doing regarding coal and the environment.  We (the US) are doing our part, and Europe is doing more than it’s part, and they are about to have a very painful winter as a result. Maybe the entire world needs painful winters for the next 20 years in order to reduce CO2 levels.  But try and sell that to average Americans - Hell, wait until February, and try and sell that to the average European.

That will be a very hard sell in the US, whether one is a D or an R.  

And, if we need fossil fuel, why on earth would we be going to Saudia Arabia or Venezuela for it instead of the Permian Basin, or other. sources in the US and Canada.  There’s only one answer - government regulation based upon wishful thinking.

Smoke that!!

Okay, I'll light up.  The article does not project that peak oil is 2019, or 2022, or 2025.  That would be 2035 based on projections by SP Global Commodity Insights, not Greenpeace.  For those that would care to read about S&P Global Commodity Insights, here is a link to the WIKI.  https://en.wikipedia.org/wiki/S%26P_Global_Commodity_Insights

Most energy analysts still maintain we are a long way off peak fossil fuels: S&P Global Commodity Insights’ most recent forecast pins 2038 as the year fossil fuels will peak, with peak coal coming in 2024, peak oil coming in 2035 and peak gas coming after 2050.

Here is another excerpt: Consultancy McKinsey & Company forecast in April of this year that global fossil fuel demand will likely peak before the year 2030. The International Energy Agency, meanwhile, said in October 2021 it believes fossil fuels will peak by 2025 if countries actually meet their stated climate pledges. 

I consider both McKinsey & Company and the International Energy Agency to be reliable, non-political sources.  Still, their opinions are projections based on data.

The Strategic Petroleum Reserve is a tool.  I'm sure those struggling to pay for gasoline appreciate any action that serves to bring down the price.  I doubt they care whether it is a political decision or not. Here is a quote from:  https://www.worldometers.info/oil/us-oil/

The United States has proven reserves equivalent to 4.9 times its annual consumption. This means that, without imports, there would be about 5 years of oil left (at current consumption levels and excluding unproven reserves).

 

Anyone that thinks that the current administration is holding back production of oil and gas is ignoring the many articles that tell a different story based on facts.  The administration has little to no control or influence over what energy companies choose to do.  Here is an example head line from a Washington Post article: “Biden is approving more drilling permits on public lands than Trump, analysis shows”.  The vast majority of oil and gas development is completely out of the federal government’s control.  It occurs on private lands and is regulated by states.  The only instance where the federal government has a modicum of control is leases for federal lands and waters.  Without going into a lot of detail regarding the O&G industry’s access to federal leasing, it is sufficient in my mind to simply state that the industry currently holds about 10 million acres of undeveloped federal leases.  If anyone cares to complain about the lack of supply that causes high prices, I suggest they tell the industry to go develop those acres.  Of course, the industry chooses to not develop those acres because that would cause a supply glut and crash the price of oil and natural gas.  We need to get real that the price of gasoline and natural gas is caused solely by decisions made based on a company’s bottom line.  We may not like the price of gasoline but the oil companies sure do.  They are making great profits and making up for all the years that they over produced and crashed the price of fossil fuels.

 

The complaint that China and India are not doing their part, though true, is a feeble excuse for the US to not do all it can do to reduce GHG emissions while maintaining reasonable energy costs for consumers and industry.  Global climate disasters will take care of bringing all major emitters to a point of serious action in time.  India is currently suffering under climate related disasters.  Maybe if the US and its allies take meaningful climate actions, it will make the impact of China and India coning late to the issue somewhat less of a disaster for the world.

 

I have zero concerns for who the author of the article is.  That's just another attempt at avoiding the issue by complaining about the source.  I read quite a few articles that basically have the same opinion and similar time lines.  Those that need to read one of those articles from a different author will not have to look far.

 

All I know is this!

A.  The more renewables we get, the higher my electric bill gets!  That is a proven FACT!!  I can show you my utility bill for the last 10 years if you would like!

B.  The more renewables we get, the less RELIABLE my energy gets!!

C.  If I despised the fossil fuel energy as much as Mr. Peel does, I'll just be damned if I would continue to work in an industry directly affected by fossil fuels.  If I believed in it that much, I'd go back to selling signs or something!!

 

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