India's oil demand set to plateau by mid- 2040s: BP Chief Economist

Global oil demand will flatline till 2035 before falling, as Chinese demand slows

India’s oil demand is expected to plateau only by the mid-2040s under the current trajectory, BP chief economist Spencer Dale said on Wednesday.

Globally, oil demand will flatline until 2035 before declining on the back of Chinese demand jitters.

“In the current trajectory, the level of global oil demand in 2035 is exactly equal to the level of oil demand today. Oil demand for the next 10 years or so, will flat line,” Dale told reporters.

The findings are part of the BP Energy Outlook 2024 report. 

While parts of the emerging world continue to witness a spurt in growth in oil demand, demand in developed regions including the OECD has been falling for the last 15-20 years, he explained.

“Chinese oil demand is expected to start declining by the end of this decade,” he said.

In June, the International Energy Agency (IEA) predicted a steady increase in the supply of crude oil will outpace global demand, resulting in a glut in the market by 2030.

The BP report shows the demand for oil in the road transport falling by the largest margin.

“This would occur due to improvements in vehicle efficiency, alongside rising sales of electric vehicles,” Dale said.

“In India, we have seen increasing electrification of electric two-wheelers, but now natural gas two-wheelers have a role to play. We are less clear as to whether the move away from oil based vehicles would be driven mostly by electric or by natural gas powered vehicles,” he said.

Non-Opec supplies

On his forecast for oil prices and supplies in the short term, Dale said global markets remain worried over events in West Asia.

“In terms of the fundamentals of the outlook, most of the consensus for the next year is that oil demand continues to grow. But many of those outside forecasts also point to strong growth in non Opec-plus supplies, with many of those scenarios suggesting this would largely mean the growth in overall demand,” the economist said. 

The main sources of growth in production capacities in this list of countries are the United States, due to a growth in tight oil volumes, Brazil and Guyana, he said.

“That would mean the scope for Opec to bring back production capacity to be relatively limited,” Dell added.

An intergovernmental organisation of 13 major oil-producing nations, including Saudi Arabia, Iran, Iraq, and Venezuela, among others, Opec is considered a ‘cartel’ by economists.

Member countries accounted for an estimated 37 per cent of global oil production and 79.1 per cent of the world’s ‘proven’ oil reserves as of 2023.

Opec-plus is an alliance of oil-producing countries led by Russia and the Organization of the Petroleum Exporting Countries (Opec).

In June, Opec-plus nations agreed to extend two sets of voluntary production cuts. The grouping extended total production cuts of 5.86 million b/d (barrels per day) or 5.7 per cent of global oil demand.

This includes a headline production cut of 3.66 million b/d by a year until the end of 2025.

It will also prolong the 2.2 million b/d production cuts currently being implemented by 8 countries including Saudi Arabia and Russia, till September.

These were set to end by June, but will now be phased out over a year from October 2024 to September 2025.