If even a year ago, some reputable expert said that the moment of peak oil had already passed, market participants would have laughed that expert right off the drilling rig. Then the coronavirus happened. Analysts from Sweden are also sure that humanity’s thirst for oil may never again return to prior levels. Besides, many large countries, namely the United States, the EU, and China, are actively switching to green economies which is a death sentence for oil.
The US and EU authorities plan to become completely carbon neutral by 2050. China expects to tackle this task by 2060. The result of the green strategy will be a reduction in oil consumption by more than two times. Thus, the peak of oil demand will occur in the period between 2025-2030 and then it will start its inevitable decline. The coronavirus pandemic has just accelerated long-term trends that are transforming where energy comes from. Apparently, some of those changes will be permanent.
Nordea's chief analyst Thina Saltvedt stressed that suddenly, three global powers – the EU, the US, and China decided to make their economies greener. She added that perhaps the reason behind this decision was purely commercial. Apart from the goal to combat climate changes, they understand that renewable sources of energy are the future.
If the trend of ditching oil continues to gain momentum, then not only consumption but also production will begin to decline after 2026. The price of oil will be below $60 per barrel. In Sweden, the government is also gradually abandoning oil. According to a recent survey, almost 52% of Swedes are in favor of banning state pension funds from investing their pensions in fossil fuel companies.
