McKinsey: Peak Oil May Be Just Three Years Away

According to McKinsey & Company’s Global Energy Perspective research, world demand for petroleum may reach its peak as soon as 2025.

Global petroleum markets are facing an unprecedented range of uncertainties, such as the ongoing Russian invasion of Ukraine roiling markets in Europe, which sent fuel costs soaring seemingly overnight. It’s becoming increasingly clear that limiting global warming to 1.5°C is unlikely to occur, even with growing global public and private sector commitments to achieving net-zero emissions in the coming decades.

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To avoid supply uncertainties and ensure that climate pledges will be successful, the report projects that a rapid global shift in the energy system is needed to accelerate its transformation. It estimates that the share of renewables in global power generation will double over the next 15 years, with total fossil fuel demand peaking before 2030. The report provides specific outlooks for various fuel types such as natural gas, oil, coal, hydrogen, and sustainable fuels, and also provides a view on efforts to decarbonize the energy industry.

“In the past few years, we have certainly seen the energy transition pick up the pace. Every year we’ve published this report, peak oil demand has moved closer. Under our middle scenario assumptions, oil demand could even peak in the next three to five years, primarily driven by electric-vehicle adoption,” said Christer Tryggestad, a Senior Partner at McKinsey, in a press release.

The report anticipates a shift toward low-carbon energy solutions, with renewables expected to triple in growth by 2050 and account for 80-90% of power generation in the same timeframe. Rapid technological advancements and optimized supply chains have dramatically lowered the costs of renewable energy generation, resulting in 61% of new renewable capacity installations already priced lower than fossil fuel alternatives. The firm highlights the continuing adoption of electric vehicles and a growing renewable energy investment market as key factors that will drive a decarbonized future.

Despite net-zero pledges by governments and businesses, widespread adoption of electric vehicles and decarbonization technologies, and an estimated 85% renewable power system by 2050, climate scientists are projecting that global warming will exceed 1.7 degrees, making it all the more critical that emissions-generating technologies go the way of the dinosaurs as quickly and efficiently as possible.