The oil industry would like to know when global demand will peak. That’s hard to predict.

An accurate estimate depends on a whole lot of variables.

Global demand for oil just keeps growing. It’s only fallen once in the past dozen years — in 2020, at the start of the COVID-19 pandemic. After that, it roared back.

But as the world continues to transition away from fossil fuels, at some point we’ll likely hit “peak oil” — when demand tops out before it begins to decline. Oil companies, industry analysts, clean energy advocates and more are trying to forecast when exactly that peak might happen, and their predictions vary.

According to a recent projection from Goldman Sachs, the peak won’t happen until 2034. But according to BP, demand growth could end next year. Other analysts, meanwhile, predict peak oil is anywhere from a few years to decades away. So why do these forecasts differ so much, and why do they matter?

To answer that, we need to acknowledge the long-standing connection between economic growth and oil demand. The two have gone hand-in-hand for decades.

“Steadily increasing demand is highly correlated with global GDP, global income,” said Christof Rühl, an adjunct senior research scholar at the Center for Global Energy Policy at Columbia University. “Very simply, the richer people get, and the more people in the world get rich, the more they drive.”

Growing, globalized economies also demand more oil for shipping goods across oceans, flying people and stuff in planes, and making things with petrochemicals: Plastic bags, toys, fertilizer and cosmetics, to name a few.

In other words, economies that make more stuff and move more people around demand more oil. But that might be changing.

“This idea that oil and the economy are kind of joined at the hip, that’s no longer the case,” said Clark Williams-Derry, an analyst with the Institute for Energy Economics and Financial Analysis. 

This is happening for a few reasons, Williams-Derry said. For one, the rise of electric vehicles.

“Just last year, about one in five cars sold globally was an electric vehicle,” Williams-Derry said.

At the same time, gas and diesel-powered vehicles are getting more fuel efficient, Rühl said. So are other sectors.

“The same is true for the oil which is used in shipping and flying,” he said. “And the same is true for the oil which is used to produce plastic bags and things like that.”

Plus, most countries have signed on to the Paris climate agreement, pledging to reduce greenhouse gas emissions, which generally means cutting oil use. 

All of these factors — more EVs, better fuel efficiency, efforts to lower carbon emissions — mean that oil demand will probably stop growing at some point. And for planning purposes, the oil industry and its investors would like to know when.

But nailing down a precise date is difficult, because forecasters need to consider many variables, including economic, population and technological projections.

“It’s largely the assumptions around economic activity and the rate at which new technologies penetrate that’s largely the driver of those differences between the various scenarios that you see,” said Alan Gelder, an oil industry analyst for the energy consulting firm Wood Mackenzie.

One of the biggest wild cards, he said, is how quickly new technologies develop, particularly EVs. But technology isn’t the only factor. 

“I think we’d really have to see a major shift in the culture as well in order to actually see oil demand dropping,” said Ellen R. Wald, a fellow at the Atlantic Council. 

Countries could miss their climate pledges, she added, or EV sales could fall short — their growth in the U.S. has slowed recently. So, she’s skeptical that forecasts of peak oil demand are anywhere near accurate.

“They’re just saying, if X, Y and Z happen, you’re going to see this, or if A, B, and C happen, you’re going to see that,” Wald said.

However everything plays out, the fact that oil companies and analysts are even talking about a potential date for peak oil is significant, said Williams-Derry, because the uncertainty about when it might happen is rubbing off on oil and gas investors.

“Just the fact that they’re taking this issue seriously is a sea change for the oil industry that has relied for decades on a perception of inevitability in oil demand growth,” he said.

But that perception of inevitability, Williams-Derry said, has been punctured.