Saudi Arabia’s oil minister, Ali al-Naimi, asked the audience at a conference last month, “Is there a black swan that we don’t know about which will come by 2050 and we will have no demand?”
Saudi Arabia’s oil minister is concerned about potentially disruptive trends that could undermine the oil industry in the decades to come. New technologies and efforts to cut carbon emissions offer potentially existential threats to the world’s most important commodity.
Current projections from the IEA and other analysts all forecast demand for oil increasing, with medium term forecasts calling for oil consumption to rise by 6.6 million barrels per day by 2020. But energy forecasting is a notoriously fickle endeavor. A year ago the IEA projections were one million barrels per day higher. Three years ago the IEA projected that 79% of oil demand growth would come from the BRIC countries, Brazil, Russia, India and China. This year the IEA projects only 63% of growth to come from those regions.
There is historical precedent for Ali al-Naimi to be concerned. Oil markets are highly volatile and carry enormous geopolitical and environmental baggage that provide great incentives for governments and consumers to find alternatives. New technologies like the internet, mobile phones and hydrofracking shale have all disrupted established industries, taking experienced analysts by surprise every time.
The world did not always run on oil, and there may well come a day when oil no longer reigns supreme. As a previous Saudi oil minister, Sheikh Yamani said in 2000, “Thirty years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.”