Outlook 2024: Oil pricing in a post-peak-demand world

The carbon intensity of oil may bring a change to pricing long-term

The latest views from the IEA indicate that coal, oil and natural gas demand will peak by 2030, just a handful of years away. Regardless of the date, it is useful to understand how the oil market may change as demand begins to decline. Should demand fall near the natural rate of production decline, as the IEA points out is necessary for the world to reach net zero by 2050, we will see a disruption in the long-term price-setting mechanism for oil. This shift could be as seminal as the switch from posted prices to market prices in the 1970s or the financialisation of oil. The long-term price will fall sharply, placing intense pressure on oil-producing firms seeking to compete to retain a marke