Elon Musk has announced he thinks that the world will reach peak oil demand within the next five years, which seems to be in-line with what the International Energy Agency (IEA) predicted in a report it published in late 2022. The IEA said the demand for oil would level off around the middle of this decade and then start to go down towards the year 2050 (and presumably beyond).
According to IEA Executive Director Fatih Birol,
Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come. Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.
The IEA also presents several possible scenarios that will affect when peak oil demand is reached. The first is the Stated Policies Scenario (STEPS), which is a more conservative scenario that doesn’t simply assume that governments will reach their stated goals for reducing oil need.
Then there’s the Announced Pledges Scenario (APS), whose aim is to deliver a more accurate picture, taking into account recent announcements, and assuming that governments will mostly meet their targets to cut oil dependency and CO2 emissions. The third scenario is Net Zero Emissions by 2050 (NZE), which assumes that by the year 2050 CO2 emissions will be eliminated completely, although it sounds like not even the IEA thinks this will actually happen.
Returning to Elon Musk’s statement, well, even if he is right about when oil demand will actually peak, it doesn’t mean countries’ oil needs will drop off sharply after that. In fact, the most realistic models predicting this today all say we will most certainly still be using a lot of oil around the world even after the middle of the century, although breakthroughs that cannot be predicted will certainly have an impact on that.