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Will Peak Demand Roil Global Oil Markets?

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Abstract

“Peak oil”—the notion that the depletion of accessible petroleum deposits would soon lead to declining global oil output and an upward trend in prices—was widely debated in the late 1990s and early 2000s. Proponents of the peak supply thesis turned out to be wrong, given the introduction of fracking and other new extraction methods. Now the notion of peak oil is back, but in reverse form, with global demand set to flatten and then fade amid growing use of EVs and other low-carbon technologies. The arrival of “peak demand” would turn global oil markets into a zero-sum game: Supply growth in one region or field would simply push down prices, driving out higher-cost producers elsewhere. A key question is how U.S. producers would adapt to the new market environment.

Suggested Citation

  • Matthew Higgins & Thomas Klitgaard, 2025. "Will Peak Demand Roil Global Oil Markets?," Liberty Street Economics 20250414, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:99834
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    File URL: https://libertystreeteconomics.newyorkfed.org/2025/04/will-peak-demand-roil-global-oil-markets/
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    Keywords

    oil; crude oil; petroleum; fuel prices; OPEC; peak oil demand; consumption; electric vehicles; supply; fracking; global market; extraction;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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