Is the end of the oil age in sight? For the first time, the International Energy Agency (IEA) expects global oil demand to peak “before the end of the decade” due to the rise of electric cars. However, authorities and citizens must take action to ensure that demand falls. earlier”.
“The transition to a clean energy economy is accelerating, and peak global oil demand is in sight before the end of this decade as electric vehicles, fuel efficiency and other technologies advance,” Fatih Birol, executive director of the IEA, said in a statement on Wednesday.
In its Oil Report 2023, a five-year view of the market, the IEA estimates that global demand will continue to increase, but that growth is “expected to moderate significantly through 2028”.
In its previous World Energy Outlook report for 2022, the IEA, an offshoot of the Paris-based OECD, already saw “global oil demand recovering despite high prices, peaking and stabilizing after 2035.”
But the energy crisis, which began with the post-Covid recovery in 2021 and was significantly exacerbated by the 2022 war in Ukraine, has upset the timetable: the high energy prices and security of supply issues that this unprecedented crisis has highlighted , accelerate the transition to clean energy energy technologies, stresses the IEA.
According to the forecast, gasoline demand will decline after 2023 and “the use of oil as a fuel for transportation is expected to decline after 2026” as cars switch to electric cars.
In the developed OECD countries, this will even lead to a reduction in oil hunger as early as 2024.
However, not all countries and sectors are moving at the same speed: This downward trend is likely to be held back by booming demand for petrochemical products and strong consumption growth in emerging markets, which will largely offset the fall in demand in advanced economies, the IEA says .
“Based on current government policies and market trends, global oil demand is projected to increase by 6% to 105.7 million barrels per day (mb/d) between 2022 and 2028 – supported by strong demand from the petrochemical and aviation sectors,” the experts note firmly.
“Despite this cumulative increase, annual demand growth is expected to slow from +2.4 mb/d this year to just +0.4 mb/d in 2028, indicating a peak in demand.”
Bringing demand down “earlier in line with the IEA scenario of net-zero emissions by 2050” would require “additional policy action and behavioral changes,” the agency stresses.
Record investments in oil
Oil markets are “slowly reconfiguring” after three years of slump marked by the pandemic and then the Russian invasion of Ukraine, the IEA recalls.
They could tighten significantly in the coming months under the influence of production cuts by the OPEC+ alliance looking to support prices. However, according to the report, these limitations could ease in the coming years.
While the late lifting of China’s drastic anti-Covid restrictions at the end of 2022 led to “a post-pandemic recovery in oil demand in the first half of 2023”, the IEA expects this demand growth to “slow down significantly from 2024 onwards”. .
Additionally, global investment in oil and gas exploration, exploration and production is on track to hit its highest level since 2015 and to rise 11% year over year to $528 billion in 2023, a contradicting figure on the efforts needed to curb global warming.
In 2021, the agency even recommended that the world immediately forget about any new project to limit global warming to 1.5°C compared to pre-industrial levels.
Assuming that “the world’s major oil producers stick to their plans to increase their production capacity,” the level of these investments would be sufficient to meet demand.
But it “exceeds the amount that would be needed” for the world to aim for carbon neutrality in 2050. Therefore, the IEA is appealing to the oil world to “adjust their investments to ensure an orderly transition”.