Oil has been used by humans since as far back as 3,000 BC, but the modern industry didn’t truly get up and running until the opening of the first commercial oil well in the mid-19th century.
It was a pivotal source of energy in the development of civilisation as we know it and remains an important commodity to this day.
However, with concerns about climate change intensifying due to the steadily warming global temperatures, the demand for oil is under threat. This is because oil operations can release harmful pollutants into the air and water, damaging plants and animals and their natural habitats.
We’ve taken a look at how the demand for oil is going to be affected and the key influencing factors.
Transition to renewable energy
Governments and companies across the globe have been investing increasing amounts in renewables in recent years. Indeed, the UK aims to be carbon net zero by 2050 and became the first country to pass such a pledge into law.
With so many others taking this stance, the International Energy Agency forecast that 2023-2028 would see renewable capacity increase by more than it had in the past 100 years combined, resulting in it accounting for 42% of global electricity generation.
This will likely lead to a decrease in the demand for fossil fuels like oil, which previously accounted for more than one-fifth of electricity production just 50 years ago.
Electrification of transport
The International Council on Clean Transportation (ICCT) states that electric vehicles (EVs) “are the single most important technology for decarbonising the transport sector”.
New petrol and diesel cars will no longer be sold in the UK or the EU from 2035, pushing consumers towards EVs. However, logistics industries, such as trucking, are said to be around 10 years behind passenger cars in terms of electrification.
With the increasing focus on using renewables to generate electricity instead of oil, it will no longer be in demand from the majority of road users.
Energy efficiency and conservation
Oil demand has also been reduced by an increase in energy-efficiency initiatives such as building retrofits, industrial upgrades and increased stringency on the energy usage of everyday appliances and equipment.
Energy conservation can increase economic capital, reduce the damage to the environment, and increase personal security and comfort.
Geopolitical and economic factors
Oil is one of the commodities that is traded in the greatest volume on international markets. This is largely due to its volatility, which has spiked in recent years due to Russia’s invasion of Ukraine.
While developed countries are pushing towards electrification, the cost of this is high and less accessible to emerging economies. As the demand for energy increases, they are more likely to be reliant on oil if it remains compatible with their existing infrastructure.
