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Rashid Husain SyedThe halcyon days of crude oil are over.

The reality of the transition is dawning on stakeholders. From the Organization of Petroleum Exporting Countries (OPEC) and Russia, to the major oil companies, all are beginning to recognize, appreciate and react to this changing global energy kaleidoscope.

Russia was denying the reality. No more.

“The peak of consumption may have already passed,” Bloomberg quoted Deputy Russian Finance Minister Vladimir Kolychev as saying in Moscow.

Until recently, Russia was hesitant to concede this change in the marketplace. President Vladimir Putin said in October that growing demand from Asia would support Russian energy exports in the coming decades. In March, the Russian Economy Ministry forecasted oil consumption would peak around 2045.

The COVID-19 pandemic has completely changed that perspective and Bloomberg reports the Russian Finance Ministry has begun preparing for lower revenues from oil.

Others are also beginning to understand the changing crude oil climate. OPEC is acknowledging that an end to the crude era is in sight – albeit two decades away. OPEC sees oil demand peaking in 2040. However, it acknowledges that this forecast might still be too optimistic.

And although the Paris-based International Energy Agency (IEA) sees global energy demand “plateauing” and not peaking over this decade, it’s still conceding that solar energy is the new king. In the introduction to its World Energy Outlook 2020, IEA executive director Fatih Birol dubbed solar “the new king of electricity.”

A number of factors have contributed to making the crude oil future uncertain and gloomy:

  • the growing emphasis on green energy;
  • the increasing use of batteries rather than fuel to drive vehicles;
  • the plummeting prices for batteries;
  • the growing number of electric vehicles around the globe;
  • the change in the environmental direction the United States will witness under president-elect Joe Biden;
  • the ongoing pandemic.

And these changes are here to stay.

“We’re not going back to the same economy,” U.S. Federal Reserve chairman Jerome Powell cautioned in mid-November. A new economy is dawning, he asserted – people will continue to work from home, travel less and binge on digital programming.

About two-thirds of COVID-19’s impact on oil demand will be from setbacks to the global economy, according to some estimates, and one-third will be from permanent changes in behaviour.

The peak of the oil market is suddenly upon us, Tom Randall and Hayley Warren wrote in a Bloomberg piece in early December.

Oil majors are taking the cue. British giant BP in September made an extraordinary call. Humanity’s thirst for oil may never again return to prior levels, the company said. That would make 2019 the high-water mark in oil history. Royal Dutch Shell is also committed to net zero emissions by 2050. Total SA, France’s biggest oil producer, is also committed. Spain’s Repsol and Italy’s Eni made similar pledges in 2019.

The list of energy analysts who underline that peak oil demand is drawing closer is growing. A list compiled by Randall and Warren includes Norway’s state-owned Equinor (predicting a market peak around 2027-28), Norwegian energy researcher Rystad Energy (2028), French oil major Total SA (2030), consulting firm McKinsey (2033), clean-energy research group BloombergNEF (2035) and energy-industry advisers Wood Mackenzie (2035).

These emerging forecasts mark an overwhelmingly view that this year’s drop in oil demand isn’t just another crash. While a number of other factors were already in play, COVID-19 has accelerated the long-term trends.

Consequently, the rush to monetize crude oil assets is on.

Peak oil demand is imminent. The only issue is: how soon?

Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has been asked to provide his perspective on global energy issues by both the Department of Energy in Washington and the International Energy Agency in Paris.

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