Energy Musings - August 18, 2025
Climate activists promoting the Peak Oil scenario are relying on the use of "energy transition delay" to avoid having to seriously re-examine the assumptions underlying their forecasts.
Is Delay In The Energy Transition A Copout?
A recent Financial Times article titled “Big Oil heeds call to ‘drill, baby, drill’ in bet green transition will slow” created an interesting discussion thread on LinkedIn. The article focused on the author's concerns about the adequacy of new exploration efforts by the oil and gas industry. A need for future productive capacity drives these efforts, but is enough money being spent? The need for more oil and gas comes from a belief that the global energy transition is being delayed. What if it never happens?
“The world’s leading oil companies are stepping up their hunt for new oil and gas reserves, as it bets a slower than expected transition to clean energy will set the stage for stronger fossil fuel demand for decades to come,” was the article’s lead sentence. Is the media confirming that the green energy revolution is fading? Or is it being abandoned? Why ask? It’s because the author relies on a report from a leading energy consulting firm that has been aggressively promoting an early peak oil scenario for years, which now says it is merely being postponed but will still happen soon.
Energy consultant Wood Mackenzie, which has been covering the oil industry since 1973, has been a leading promoter of peak oil, gas, and coal, driven by its belief that the public’s embrace of a decarbonized world means an early end to fossil fuel consumption growth. The firm has been discussing such a scenario for years. The following graphic from a recent Google search about Wood Mackenzie and peak oil shows the second and third articles listed. These articles reflect the consultant’s views from its research in 2018 and 2019. But their view hadn’t changed until recently.
Wood Mackenzie has promoted an early end to the Age of Oil.
Last year, the firm commented that their base case called for oil demand to peak in 2030, while natural gas plateaus from 2036. The scenario expects low-carbon energy to grow to 14% of energy consumption by 2040 and 28% by 2050, with electricity becoming the largest energy market by 2050. Renewables, primarily solar and wind, help drive the energy shift.
Interestingly, their model saw a significant role for oil in the transport sector because of the needs in the heavy-duty (truck) mobility market. This conclusion comes despite their assumption that 90% of new car sales by 2050 in developed countries will be electric vehicles. The result is that oil use in the transport sector is projected to remain around 75% in 2050. That helps the fossil fuel industry account for 46% of total energy consumption.
When one examines the charts showing the projected consumption of coal, oil, and natural gas from 2023 to 2050 in the study, we discover that oil consumption peaks at 108 million barrels per day (mmb/d) in 2030 and declines to 92 mmb/d in 2050. Coal is the first fossil fuel to peak, while natural gas is the last.
Base case sees oil use in 2050 at about the 2000s level.
A chart reportedly taken from Wood Mackenzie’s 2024 outlook shows a sharply different view from the earlier projection. The chart was presented in the Financial Times article, but the scale is wrong. The world is not consuming 165 mmb/d of oil currently. The historic pattern of consumption shown is accurate, so we assume the scale is only mislabeled. However, the FT’s use of the chart is to show the red dotted line showing that the delay in the energy transition means oil demand will be about 5% more per year, making its future peak roughly 113 mmb/d, declining to 97 mmb/d in 2050. Importantly, there is almost no decline in oil use 25 years from now compared to now.
A delayed energy transition suggests that oil company strategies are correct.
Should we believe Wood Mackenzie’s forecast, or is it a sop to the oil companies to retain them as consulting clients? We believe the firm is more honest than that. However, we suspect they have realized that the green energy revolution was based on subsidies, mandates, and ill-founded economic analyses. Without these dictates, the public will seek energy that is affordable, available, reliable, and clean. Reliable energy has become increasingly important to the public as they experience increases in brownouts and blackouts, and risk massive disruptions to their lives and economic well-being, such as experienced when the Spanish and Portuguese grids crashed earlier this year.
Furthermore, the public recognizes how vital oil and other fossil fuels have been in driving global economic growth and human progress. These fuels will remain crucial for improving future global living standards. The seven billion people living in poverty and the billions with no or only limited access to electricity desire lifestyles and longevity similar to what people in the developed world enjoy. Oil is crucial in that future, and not merely for its role in transportation but for almost everything people need in their daily lives.
Arjun Murti, a partner at energy banking firm Veriten, had a podcast discussing the use of the word “delay.” Murti was the Goldman Sachs oil analyst famous for predicting the oil price Super Spike of the mid-2000s when spot oil prices climbed steadily from the $40s a barrel in 2004 to $145 in mid-July 2008. His prediction was based on a clear understanding of the industry dynamics at work during that period. What Murti saw at that time was forces driving oil demand at a time when supply growth was limited, which are similar to our emerging oil future.
Murti’s core view is the massive unmet energy needs of the seven billion people living in poverty. He sees three key assumptions in the peak oil forecasts that are questionable. First, there is the over-estimation of acceleration in fuel economy and other efficiency gains globally, which fails to account correctly for increasing vehicle weight and consumer preferences. Second, there is the aggressive forecasting of an “s-curve” adoption of electric vehicles in all major markets of the world. Finally, he finds the belief that “vast swaths of humanity will remain poor into perpetuity” to be a “repulsive implicit assumption.”
Furthermore, he questions the assumption of forecasters that “humanity would suddenly invert its energy hierarchy of needs by prioritizing carbon emission reductions over all other objectives.” He noted that this was a key driver of the peak oil forecasts during the 2020-2023 “energy transition and urgent climate crisis” narrative. The evidence is growing that this assumption is falling flat.
Although he sees the energy transition worldview fading, he acknowledges that there remain lingering questions about the long-term health of global oil demand. Those questions are reflective of the sluggish global GDP growth in recent years, China’s oil demand growth rate slowing sharply, and the near-term substitution of renewable energy for oil use in power generation in places like Saudi Arabia.
The Saudi Arabia oil for renewable energy substitution is a one-off; however, we continue to see many Asian, South American, and African countries stepping up their use of fossil fuels to generate power. Oil is not a significant power generation fuel. China does face demographic challenges. Additionally, its industrial policy promotes the domestic growth of renewable energy equipment manufacturers to supply the world, committed to the energy transition. China wants to capture the growth in these markets, and so far, it is being successful. However, with its electric vehicle industry in severe oversupply and many manufacturers failing financially, it has abandoned subsidies. Furthermore, 50% of China’s electric vehicles are hybrids, ensuring a certain level of oil demand. Additionally, we would point out how China has used its oil demand growth to influence oil prices by slowing it to drive the global price down so it can purchase cheap oil for its inventory. Lastly, it is interesting that China is using its coal resources to manufacture a million barrels a day of gasoline utilizing the Fischer-Tropsch process.
Murti believes the world is recognizing that the “easy energy transition” creates adverse societal costs, which are far greater than advertised and more than governments can afford. He also believes that the mindset that everyone deserves to be energy-rich is gaining in acceptance. Murti asks, Why shouldn’t the seven billion people in poverty be entitled to the lifestyles of the one billion in the West?
Rather than accept the use of “energy transition delay,” Murti believes people, especially oil and gas industry decision-makers, should examine all the assumptions behind the oil forecasts and question whether they are realistic or merely idealistic. If the latter, the world will likely face a second Super Spike, which may inflict significant harm on economies and people’s well-being. It is a warning that people should heed.