Back in 2016, Royal Dutch Shell as the world’s second-largest energy company by market value, shocked everyone by saying that global oil demand would probably peak as quickly as five years. “We’ve long been of the opinion that demand will peak before supply,” Chief Financial Officer Simon Henry said. “And that peak may be somewhere between 5 and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the demand for transport.”
Then the International Energy Agency commented, slightly less pessimistically than Shell, that while it still saw oil demand growing for several decades, there would be major demand falls in areas like power generation, buildings, and passenger cars. They saw a long plateau from 2015 all the way out to 2040.
Last month saw Exxon Mobil slash its proven reserves and with that its future income.
But what’s being prepared this year is the biggie: Saudi Arabia’s Aramco is preparing to sell 5% of its assets to help funds its’ countries’ future social welfare. They were thinking of a total company value of around US$2 trillion. Analysts such as Wood Mackenzie Ltd think more realistically $400 billion. To keep this remaining stable Arabian state stable into the long term, that value difference is a big whoops because it greatly lowers the future returns the state can redistribute.
Further, if peak oil kicks in as alternative fuels and electric cars gain popularity, that future revenue is looking shakier still.
Top oil reserves do not mean stable governments. In estimated barrels:
Few countries on that list are in sound political or social health.
Those who have led the march away from oil dependence and towards a stable climate, such as the EU and China, are increasingly the world’s remaining peace-supporting poles. But with many major petro-companies and petro-states alike in stasis or decline, our oil hangover is getting stronger.
The great contest between a sustainable and lower-oil world and a set of declining oil-reliant states and companies is really rumbling.