Large Thing

Monday 12 May 2025

For about a half century now oil has been steadily losing market share to an array of other energy sources, in the global economy. There are myriad trendlines which help explain this evolution, but the rise of electricity as an economic development tool is certainly the most influential, followed by economic development more generally, which tends to drive out excesses and inefficiencies. Regardless of where you stand however on these issues, everyone agrees that the oil sensitivity of the global economy has fallen dramatically. That’s the result of oil’s market share falling from 50% to 30% over this period.

The reality however is that while oil’s market share has fallen, it’s consumption in absolute terms has continued to rise, and is once again reaching all time highs. This is exactly the juncture where portions of the global climate community finds themselves ensnared, with too much focus on the prospective terminal growth phase of an energy source like oil, while paying insufficient attention to the relentless growth in aggregate energy use. Yes, each unit of global GDP relies less now on oil. Instead, reliance on coal (new all time highs), natural gas (new all time highs), and renewables (also new all time highs) has risen. So, during the 50 year period when oil’s market share fell from roughly 50% in 1973 to 30% recently, oil consumption itself advanced by 67%, from 56 mbpd (million barrels per day) to over 100 mbpd.

Is there any indication that oil has reached its terminal growth phase? Let’s consider a few, important points of interest in this regard. First, global oil demand is up only 2.2% since the year 2019—an important baseline year, as oil demand reached a new all time high of 100 mbpd prior to the pandemic.