The Oil Paradox: Why Global Demand Keeps Rising Amid the Energy Transition

Despite global pledges to cut fossil fuel consumption, oil demand continues to rise. In 2023, worldwide consumption topped 100 million barrels per day for the first time, even as renewable energy installations and electric vehicle adoption hit record levels (Energy Institute, 2024 edition. Statistical Review of World Energy). This dynamic highlights one of the most persistent challenges in the energy transition: the enduring economic and structural reliance on oil.

The comparison between rising oil demand and renewable energy adoption is based on publicly available data from the Energy Institute (Energy Institute, 2024 edition, Statistical Review of World Energy). It assumes that economic and structural reliance on oil persists despite green investments. The efficiency discussion reflects the Jevons paradox, which theorizes that technological progress can increase rather than decrease consumption. While efficiency gains can reduce costs and improve access, they may also lead to higher consumption and long-term dependency, which presents both economic benefits and environmental risks.

Efficiency Gains Are Driving Greater Use

A common assumption is that increasing energy efficiency leads to lower consumption. However, historical and economic analysis suggests otherwise. Technological progress often makes oil cheaper to extract and use, lowering prices and expanding access. This phenomenon, known as the Jevons paradox, explains how improved efficiency can paradoxically lead to greater consumption.

For instance, hydraulic fracturing (fracking) and horizontal drilling have dramatically increased the productivity of U.S. oil fields, reducing the cost of extraction. As oil becomes more affordable, its use expands, not just for transportation, but also for industrial production and global trade. Fuel-efficient cars may also lead consumers to travel more, offsetting gains in efficiency with greater distance traveled.

The Rebound Effect on Fuel Use

Source: Wikipedia. (2025, May 4). Jevons paradox.

The Jevons paradox is visualized in fuel price-response models, where lower costs lead to disproportionately higher consumption. This effect underscores how pricing and accessibility drive usage patterns more than efficiency alone.

U.S. Oil Dominance and Export Growth

The United States now produces over 22% of global oil supply, overtaking traditional heavyweights like Saudi Arabia and Russia. This surge is driven by shale oil development in basins like the Permian and Bakken. But the U.S. is not only a producer, it is also the world’s largest consumer, using about 20 million barrels per day (U.S. Energy Information Administration (EIA), 2024).

This dual role as top producer and consumer reinforces oil's strategic importance in the U.S. economy. U.S. oil also plays a vital role internationally, particularly as a feedstock supplier to Asia's booming petrochemical sector.

U.S. Crude Oil Production

The growth of American oil production reflects structural changes in energy markets, where innovation continues to enhance extraction and export capacity.

Petrochemicals: The Underestimated Driver

While electric vehicles may reduce fuel demand over time, petrochemicals are driving a large portion of current oil consumption. Plastics, fertilizers, textiles, and industrial materials depend on oil-derived inputs. Today, petrochemicals account for about 12% of global oil demand, and their share is expected to grow significantly (The Future of Petrochemicals – Analysis – IEA, 2018, October 1).

Petrochemical production is particularly expanding in China, which has added more refining and chemical processing capacity in recent years than Europe, Japan, and Korea combined. As economies develop, demand for consumer goods, packaging, construction materials, and synthetic fabrics grows in tandem, supporting oil demand despite transitions elsewhere.

Oil Demand for Petrochemicals

Long-term forecasts suggest petrochemicals could represent nearly half of oil demand growth by 2050, reflecting their non-substitutable role in modern industrial systems. Past performance is not a reliable indicator of future performance.

Investment Implications: Oil Services in a Transitioning Market

As the world navigates its energy transition, one sector remains uniquely positioned: oil services. These firms supply technology, logistics, and engineering expertise that maximize oil extraction and production efficiency. Their work enables producers to extend the productive life of fields, optimize output, and reduce per-barrel costs.

Despite volatility in oil prices, demand for exploration and maintenance services tends to persist, particularly when efficiency and cost control become priorities. Publicly listed oil services companies are showing improved profitability and reducing leverage, suggesting greater financial resilience compared to previous cycles.

Net Margins and Debt-to-Capital Ratios in Oil Services

TTM (Trailing Twelve Months): Measures performance based on the most recent 12 months of data, updated monthly.

The figures refer to the past and past performance is not a reliable indicator of future results. The reference period for the performance data is March 2021 to April 2025. The source is Morningstar, as of 30/04/2025.

Recent data shows that oil services firms are strengthening balance sheets and lifting profit margins, which may offer compelling opportunities for investors seeking exposure to the operational backbone of the oil industry.

Conclusion: Efficiency Isn’t the End of Oil

Global oil demand is not merely a legacy of outdated infrastructure, it is being reinforced by modern efficiency gains, industrial demand, and economic development. This paradox challenges assumptions about the pace of the energy transition and highlights the long-term role that oil, and the companies enabling its efficient production, may continue to play.

To explore the full analysis, projections, and data, download the complete white paper: The Oil Paradox: Rising Consumption Amid Energy Transition.