What’s the long-term outlook for oil in a world shifting to renewable energy? Oil majors publicly say supply-and-demand dynamics will support the market. But their investment choices suggest that they’re preparing for a much weaker oil price in the distant future.

Forecasting long-term oil trends is very complicated work. Demand is affected by variables, including the economic growth of emerging markets and the global push to improve energy efficiency. The cost of new supply is driven by industry cost, investing trends and access to low-cost resources. It’s hardly surprising that 10-year projections for oil supply and demand are often riddled with errors.

Peak Oil: Will Demand Growth Decline?

In recent years, there’s been increasing talk about “peak oil” demand. At some point, the argument goes, global oil demand will stop growing and will eventually decline. Why? China is no longer fueling demand growth, as its economy is decelerating. The push for energy efficiency is gathering momentum. And oil is being replaced by cleaner energy as cars, trucks, mining equipment—and even oil-producing machinery—are increasingly electrified.

These trends have led to predictions that oil demand is likely to peak sometime in the mid-2030s, according to industry consultants such as Wood Mackenzie and Rystad Energy. Organizations such as the International Energy Agency and OPEC also predict that oil demand will peak over a wider range of time frames. It may sound far off. But in an industry that requires massive long-term investments, and where profitability is dependent upon the oil price, it’s just around the corner.

Oil Executives Say Demand Is Here to Stay…

So, what do global oil executives say? Their public statements suggest that oil demand is insatiable. Darren Woods, CEO of ExxonMobil, said in March that global demographic and macroeconomic growth trends over the next two decades will fuel a 25% increase in energy demand. “When you factor in depletion rates, the need for new oil grows at 8% a year,” he said. Mike Wirth, Chevron CEO, offered similar projections in a meeting with analysts in March. Oil and gas will represent “roughly the same share of the total energy mix in 2040 as it does today,” he said. Both executives say significant industry investment is needed to meet growing demand.

Of course, investment is still needed, even if oil demand will peak in 15–20 years. But, if we’re headed toward a peak, we would expect oil companies to start preparing for a structural downshift in demand and prices. That means national oil companies might consider boosting production to monetize assets in the ground. Countries like Saudi Arabia and Kuwait have more than 100 years of oil in the ground, which could become stranded assets if demand growth wanes.