In the Slow Peak scenario, thanks to demand from developing countries, peak oil doesn’t happen any time soon.
This article is part of the Fueling the future series, examining how oil and gas companies can navigate the opportunities and risks of the low-carbon transition.
The name Slow Peak says it all. Under this scenario, oil demand peaks, but on a schedule that reflects consumer inertia and the time necessary for cars and other oil-burning vehicles to work their way out of the stock. Even though EVs become cost and performance competitive, consumers are slow to become convinced of the advantages and are unwilling to act on them, meaning they don’t capture most of the new-car market until at least 2050.
Alternative energy costs fall, but the oil and gas industry progresses as well. The industry continues to digitize, and the cost of finding, developing and delivering oil and gas resources drops. Movement toward dominance of renewables over hydrocarbons is slow. Additionally, government attention to climate change and other environmental matters wanes, and costs don’t fall quickly enough to compensate. EV subsidies are curtailed or eliminated.
Economic growth in developing countries outpaces growth in the developed world and continues at levels that have driven oil demand for the past two decades. Notwithstanding advances in EV technology, increases in transportation demand default to the incumbent technology - the internal combustion engine (ICE).
Predictably, an emerging middle class in those countries is eager to get around, and they do it in a way that mimics mature economies (e.g., drive and fly). Newfound wealth also fuels the demand for consumer products that are made of, and wrapped in, plastics made from oil and gas liquid feedstock. Populist governments don’t get in the way of this, as it reflects what people want in the moment. Companies and capital markets continue to invest in fossil fuels, keeping oil and gas companies in business and profitable for the foreseeable future.
Let’s look in detail at the forces that lead to Slow Peak.