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Oil has been the backbone of the global economy for decades, fueling industries, transportation, and energy production. However, as climate concerns grow, the world is beginning to shift away from its heavy reliance on fossil fuels. The rise of renewable energy sources and electric vehicles (EVs) is driving change, with projections suggesting that global oil demand could peak by 2028-2030.
👉 In this article, we explore the composition of oil, its diverse uses, its environmental impact, and how it contributes to fuelling climate change.
Crude oil, commonly referred to as petroleum, is a naturally occurring, yellowish-black liquid found in geological formations beneath the Earth's surface. It is composed mainly of hydrocarbons - organic compounds made of hydrogen and carbon - along with various impurities such as sulfur, nitrogen, and metals. The specific composition of crude oil can vary significantly depending on its source, but hydrocarbons are the main components, making up 50-98% of the mixture.
Crude oil contains several types of hydrocarbons, each with distinct properties that determine what kind of product will be produced after refining. These are:
Along with these primary hydrocarbons, crude oil may also contain small amounts of other compounds like sulfur, nitrogen, oxygen, and trace metals such as vanadium and nickel. The presence of these impurities affects the quality of the crude oil and the processes needed for refining it.
Crude oil is virtually useless in its raw form and must undergo refining to convert it into valuable products. The refining process begins with fractional distillation, where crude oil is heated and separated into different fractions based on the boiling points of its components. The lighter fractions, such as gasoline and kerosene, vaporise at lower temperatures, while heavier fractions, like diesel and lubricating oils, require higher temperatures.
In this primary step, crude oil is heated in a distillation column. The process separates the oil into various products:
Some of the heavier fractions, such as fuel oil and bitumen, are subjected to processes like cracking, which breaks larger hydrocarbon molecules into smaller, more useful ones, and reforming, which rearranges molecules to create higher-value products like gasoline and aromatic compounds for petrochemicals.
This process is used to remove impurities like sulfur, which helps in reducing the environmental impact of oil products. For example, low-sulfur diesel (often called "ultra-low-sulfur diesel" or ULSD) is now a standard in many parts of the world due to regulations aimed at reducing emissions.
While the refining process is essential for turning crude oil into usable products, it comes with considerable environmental challenges. Refineries are significant sources of air pollution, emitting greenhouse gases (GHGs), sulfur dioxide (SO2), and nitrogen oxides (NOx), which contribute to climate change and air quality issues. In addition, oil refining is energy-intensive, consuming large amounts of electricity and water.
Oil is an incredibly versatile resource, forming the backbone of many industries worldwide. Its primary use is as a fuel, but it also plays an essential role in manufacturing, chemicals, and even agriculture. According the the IEA’s 2023 Oil Analysis and Forecast global oil consumption hovers around 100 million barrels per day, with usage spread across various sectors, making it one of the most critical resources for modern economies.
Transportation is the largest consumer of oil, accounting for approximately 60% of global oil demand. Oil-derived fuels (gasoline, diesel, and jet fuel) power the vast majority of cars, trucks, ships, and planes that move goods and people worldwide. Road transportation alone represents about 45% of global oil consumption, making it a significant driver of demand.
However, the transportation sector is undergoing rapid transformation. The rise of electric vehicles (EVs) is already cutting into petroleum demand, particularly in regions like Europe, China, and North America, where government policies are accelerating the shift toward cleaner alternatives.
The industrial sector is the second-largest consumer of oil, with refineries producing fuels for factories, heavy machinery, and construction. Industrial oil usage is crucial in manufacturing, as well as in the production of building materials such as asphalt for roads. Additionally, oil derivatives like lubricants are essential for ensuring the smooth operation of engines, machinery, and industrial processes.
One of the major sub-sectors within the industrial use of oil is the petrochemical industry. Petrochemicals, derived from oil and natural gas, are the building blocks of many products, including:
Despite global efforts to reduce oil use, petrochemical demand is projected to grow steadily, with the IEA noting that it could continue to increase demand for oil even as other sectors decline.
Although oil is increasingly being replaced by natural gas, wind, and solar in power generation, it still plays a role in producing electricity, particularly in developing countries and petrostates. These countries often rely on oil due to economic dependence, limited renewable infrastructure, and the accessibility of domestic oil reserves.
As the world moves toward cleaner energy, the use of oil in transportation and power generation is expected to decrease. According to the IEA’s recent report, the growing adoption of EVs is projected to reduce road transport oil demand by as much as 6 million barrels per day by 2030. Additionally, as renewable energy sources like wind, solar, and hydropower expand, the use of oil in electricity production is expected to decline significantly.
However, certain sectors such as aviation, shipping, and petrochemicals may remain dependent on oil for longer due to the technical challenges of finding suitable low-carbon alternatives.
Oil remains a cornerstone of the global energy system, but its patterns of use are changing as governments, industries, and consumers respond to environmental concerns and technological advancements. According to the International Energy Agency, global oil consumption continues to grow, though this growth is expected to slow significantly in the coming years. The IEA projects that oil demand will peak between 2028 and 2030, as alternative energy sources and electric vehicles (EVs) take center stage.
As of 2023, the world consumes approximately 100 million barrels of oil per day, a figure that is expected to continue to rise over the next few years. Between 2023 and 2025, the IEA predicts that global oil demand will increase by about 1 million barrels per day (bpd) annually, before slowing to an increase of just 100,000 bpd between 2028 and 2029. By 2029, global oil demand is expected to reach 105.6 million bpd, a 3.3% increase from 2023 levels.
However, this projected growth is not uniform across all sectors or regions. While certain sectors like petrochemicals and aviation will continue to drive demand, others, such as road transport, are expected to experience a sharp decline in oil consumption due to the rise of electric vehicles and more efficient technologies.
The largest consumers of oil are heavily industrialised and rapidly developing economies, with the United States, China, and India leading the way.
The concept of ‘peak oil’ has shifted from concerns over supply to a focus on demand. Peak oil demand refers to the point at which global consumption of oil reaches its highest level before entering a permanent decline. According to the IEA’s 2023 report, global oil demand is expected to peak somewhere between 2028 and 2030, primarily due to the increasing adoption of electric vehicles, improved energy efficiency, and government policies aimed at reducing carbon emissions.
Several key trends are driving this shift:
Despite the projected peak in global oil consumption, certain sectors are expected to continue driving demand beyond 2030.
Oil has been an essential resource for global economic development, but its environmental costs are significant. The extraction, refining, and combustion of oil contribute significantly to climate change, air pollution, and ecological degradation. As the world faces the urgent need to reduce carbon emissions and limit global warming, it’s clear that we need to reduce and eliminate our dependence on fossil fuels.
Burning oil releases carbon dioxide (CO₂) and other greenhouse gases (GHGs) into the atmosphere, making it one of the largest contributors to global warming. Oil-related emissions account for about 15% of total energy-related emissions globally. The transportation sector is particularly responsible for this, as the combustion of petroleum and diesel in road vehicles, airplanes, and ships emits large quantities of CO₂.
In order to meet international climate targets, such as those set by the Paris Agreement, global oil use needs to decline sharply. In its 2023 Oil Report, the IEA stressed that reaching net-zero emissions by 2050 will require an immediate halt to the development of new oil fields, as well as significant reductions in oil consumption. Without these measures, it will be nearly impossible to limit global warming to 1.5°C above pre-industrial levels, which scientists say is necessary to avoid the worst effects of climate change.
Beyond climate change, oil also contributes to severe air pollution, which has immediate and devastating effects on human health. The burning of oil-based fuels like petroleum and diesel releases pollutants such as sulfur dioxide (SO₂), nitrogen oxides (NOx), and particulate matter (PM), all of which are harmful to human health. These pollutants are linked to respiratory illnesses, heart disease, and premature death, particularly in urban areas with high concentrations of traffic and industry.
One of the most visible environmental impacts of oil is the risk of oil spills. These disasters can have catastrophic effects on marine and coastal ecosystems, with long-lasting damage to wildlife, fisheries, and tourism. Oil spills are a byproduct of extraction, transport, and refining processes, and while technology has improved, spills remain an ongoing threat.
While the transition away from oil is gaining momentum, several factors are slowing the pace of this shift. One major barrier is the continued investment in oil production, particularly in new fields in countries like Brazil, Guyana, and Namibia. These nations, eager to capitalise on their oil reserves, are developing new extraction projects that could prolong global oil dependence.
Reaching peak oil demand by 2028-2030 will mark a critical turning point in the global energy transition, but it will not be enough to address the environmental crisis. Even after demand peaks, the world must take more aggressive steps to reduce oil consumption, particularly in sectors like aviation, shipping, and petrochemicals, where alternatives are not yet widespread. A comprehensive approach will be necessary, involving coordinated efforts across multiple areas:
Key Area | Description |
---|---|
Stronger Government Policies | Implement policies that incentivise clean energy and penalise high-carbon industries, including carbon pricing, subsidies for renewables, and stricter emissions standards. |
Ambitious Climate Targets | Set and adhere to ambitious climate targets, such as net-zero by 2050, with concrete action plans, monitoring, and accountability. |
Increased Investment in Clean Energy Technologies | Invest significantly in renewable energy like solar and wind, and expand research into hydrogen fuel cells and carbon capture for hard-to-abate sectors. |
Infrastructure Development | Expand infrastructure for EVs, charging stations, and power grids. Developing regions need investment in clean energy infrastructure for a smooth transition. |
Technological Innovation | Advance battery technology, energy storage, and electric transportation to make clean energy more accessible, and improve efficiency in transportation and industry. |
Behavioural and Cultural Shifts | Encourage changes in consumer behaviour and corporate practices through awareness campaigns, sustainability initiatives, and incentives for reducing energy use. |
Diversifying Economies in Oil-Dependent Regions | Help oil-dependent economies diversify into sectors like tourism, finance, and technology to reduce reliance on oil revenues. |
International Cooperation | Support global efforts to reduce oil use through cooperation, such as the Paris Agreement and joint investment in renewable energy projects. |
👉 The environmental impact of oil is undeniable, and the path to a more sustainable future involves reducing our reliance on it as quickly and equitably as possible. Achieving this requires collective action across policy, technology, infrastructure, and culture, ensuring that the global energy transition is both swift and just.
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👉 Start your journey toward sustainability with Greenly today. Together, we can help your business transition away from oil dependency and towards a more sustainable future for the planet.