Peak oil is defined as the hypothesized point in time during which the world will have extracted its maximum amount of petroleum from the Earth. Petroleum is a non-renewable fossil fuel that takes thousands of years to replenish under the Earth’s surface naturally. Petroleum is still widely excavated and used to in a plethora of sectors across the globe.
Peak oil is sometimes confused with oil depletion; however, the two are different. Oil depletion refers to the decreasing trend in the amount of oil supply, while peak oil refers to the point of its maximum extraction. Peak oil originates from a combination of geological and economic factors.
Past and present
In the pre-pandemic world, the demand for crude oil was at a stable, rising trend. Before the pandemic, it was predicted that the global market of crude oil would increase by an estimated 1.5 million barrels per day for the next five years. However, with the current conditions of the globe and the pandemic impact on businesses, peak oil has been severely affected. It is well believed that global annual oil demand growth over the coming five years will fall well below 1.0 million barrels per day.
Presently, peak oil is past its crisis point during the pandemic as more countries have begun to open businesses and lift restrictions on the lockdown. Still, a drastic decrease in peak oil is expected to remain in place until socioeconomic conditions have gone back to normal. However, it has been predicted that even if global conditions were to return to normal, peak oil is not expected to reach its previous status in the market as the current conditions have created a 5 to 10 year lag in peak oil. Recovering from current peak oil conditions and creating a “V-shaped” graph for oil demands will take time, and will also be impacted by a decline in demand resulting from fuel efficiency standards especially for transport fuels.
As of 2016, there were around 1.65 trillion barrels of oil reserves in the world (with Venezuela, Saudi Arabia and Canada holding the top three positions of most oil reserves in the world) which equals to 47 years of oil consumption at the current supply rate. This number has not dramatically changed in the past three years, oil demand rises are compensated by a surplus of non-conventional oil production.
Since the trend in peak oil has been severely affected by the state of the world during the COVID-19 pandemic, countries who are stakeholders in peak oil (like Venezuela and Saudi Arabia) have become hit by the decline in global oil consumption. However, there is hope that such countries will return to their former glory once the world begins to normalize in a post-pandemic situation.