The Peak Demand Debate
The question of when global oil demand will peak has shifted from academic speculation to urgent policy concern. The International Energy Agency projects peak demand by 2030 under current policies, driven by electric vehicle adoption, renewable energy growth, and energy efficiency improvements. OPEC contests these projections, arguing demand will grow through the 2040s as developing nations industrialise. Bloomberg NEF, Wood Mackenzie, and other forecasters offer varying timelines. The uncertainty itself is a risk factor, complicating investment planning for producers.
Oman’s Exposure
Oman is acutely vulnerable to peak oil demand. Unlike Saudi Arabia and the UAE, which have massive reserves and low production costs, Oman’s oil production has been declining and requires enhanced oil recovery techniques that are expensive. The Sultanate’s fiscal breakeven oil price, while declining, remains elevated relative to the lowest-cost producers. If oil prices enter structural decline – as opposed to cyclical downturns – Oman’s economic model faces existential pressure. The country’s natural gas reserves provide some buffer, but gas markets face their own long-term demand questions.
Diversification Urgency
Peak oil demand transforms economic diversification from a desirable policy goal into a survival imperative. Every year that diversification is delayed narrows the window of opportunity – oil revenues available to fund the transition are finite and potentially declining. Oman’s Vision 2040 timeline implicitly assumes sufficient oil revenues through the 2030s to fund the transition investment. If demand peaks earlier or prices fall faster than projected, the diversification timeline must accelerate or the funding model must change.
Strategic Response Options
Oman’s options include accelerating non-oil revenue development, maximising the value of remaining hydrocarbons through downstream processing and petrochemicals, pivoting to green hydrogen (which leverages existing energy infrastructure and expertise), reducing the fiscal breakeven price through efficiency and revenue diversification, and building sovereign wealth buffers. The green hydrogen strategy is particularly important because it offers a path from fossil fuel exporter to clean energy exporter, potentially sustaining Oman’s role as an energy provider beyond the hydrocarbon era.