Global oil demand has expanded at a relatively steady pace for decades. At its current growth rate, global oil consumption will hit the 100-million-barrel-per-day (BPD) mark next year, up from 97.8 million BPD in 2017. According to most forecasts, including that of the International Energy Agency (IEA), demand should continue climbing until at least 2040 even with accelerated growth in electric vehicles.

However, in a new estimate, energy industry consultancy Wood Mackenzie has pushed up that time frame by four years, and sees 2036 as the year that oil demand will peak. Driving its view is the expected accelerated adoption of autonomous electric vehicles, which it predicts will become widely accepted by 2035. While that would finally curb the world's insatiable demand for oil, it won't dry it up completely.

An abandoned oil pump jack in a field.

Image source: Getty Images.

Drilling down into the report

Wood Mackenzie's long-term energy outlook sees a radical shift on the horizon. "Autonomous electric vehicles or robo-taxis will really change the face of transport in the coming decades," according to its head of crude oil research, Ed Rawl. In Wood Mackenzie's view, they should become commercial by 2030 and widely accepted by 2035. These vehicles will displace "a disproportionate amount of oil-based transport" and cause oil demand to stop its upward climb.

But although Wood Mackenzie expects oil demand to plateau in 2036, it doesn't expect demand for crude to dry up overnight. That's because it will take years before gas-guzzling vehicles are off the road in developed countries, and even longer in developing nations. Add to that the fact that the world also uses oil to make jet fuel and as a key building block for plastics, and it will likely remain important to the global economy for years to come.

Oil pumps at night.

Image source: Getty Images.

Why you shouldn't sell your oil stocks yet

While Wood Mackenzie's view suggests the oil industry will face a major disruption a few years down the road, investors shouldn't lose sight of the fact that the world will need a significant amount of oil between now and 2036. With demand expected to peak at more than 105 million BPD, according to the IEA, oil companies have their work cut out for them. They first need to drill enough new wells to overcome the natural decline rate of legacy fields as they deplete -- which Wood Mackenzie expects will average 5% per year through at least 2020 -- and even more to meet growing demand. In other words, the industry will need to invest hundreds of billions of dollars per year to keep up with the market's needs.

That will become increasingly difficult in the coming years because the industry slashed investment spending on large, long-term projects during its most recent downturn. In the IEA's view, the industry could struggle to keep up. The agency is most worried about the supply picture after 2020, when it projects production growth from U.S. shale plays will start to slow down without enough long-term projects in the works to fill the gap. That scenario could trigger a significant spike in oil prices.

Some big oil companies are already beginning to ramp up spending in anticipation of the market's need. ExxonMobil (NYSE:XOM) unveiled its long-term plan earlier this year. The oil giant expects to steadily increase spending, boosting it from $23.1 billion last year to $24 billion in 2018, before hitting $28 billion next year on its way to an average of $30 billion annually from 2023 to 2025. This investment should enable ExxonMobil to add an incremental 1 million barrels of oil equivalent per day (BOE/D) to its output by 2025, boosting it up to around 5 million BOE/D.

However, others continue to hold back. Chevron (NYSE:CVX), for instance, expects to spend only about $18 billion to $20 billion per year on new oil wells even though oil prices are on the upswing; this range is slightly lower than its initial outlook that it would spend $17 billion to $22 billion per year on capital projects. Chevron revised its targets because it wants to improve its investment returns and generate free cash flow to cover its dividend, as opposed to pursuing all potential growth opportunities that come its way since they might ding returns. Chevron's, and several other large producers', lack of plans to ramp up spending could leave the industry ill-prepared to meet supply challenges that appear likely in the coming years, since demand should continue to grow for almost two more decades.

Don't miss the forest for the trees

The rise of autonomous electric vehicles could finally be the cure to get the world off its addiction to oil. However, while their ascension appears to be just over the horizon, we likely still have several years before they'll make an impact. Thus, the oil industry seems to have plenty left in the tank, which could enrich investors in the coming years, especially since it's looking increasingly likely we could endure another period of high prices in the not too distant future. 

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.