If achieved, the reduction would be about 5.5% of the agency’s forecast for oil demand in OECD countries this year. Even more could be cut if measures were taken by less developed countries as well. Many of the 10 points are things that have been done before, either during the oil price crisis of the 1970s or more recently during the Covid-19 pandemic. There is strong evidence that they work.
Sharing more trips and reducing fuel consumption through practices such as maintaining the correct tire pressure and raising the temperature of the A/C can have the biggest impact. The average car occupancy is currently around 1.5 people per car. An increase of about 50% on one in 10 trips, along with using less fuel, could save about 470,000 barrels of oil per day in the short term, the IEA has calculated. Lowering the 10 km per hour (about 6 mph) speed limit on highways would save another 430,000 barrels a day.
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Reduced speed limits were introduced by the US and many European countries during the 1973 oil price crisis, and many highways now have variable speed limits to reduce congestion or air pollution. Traveling together is much easier now than it was 50 years ago, when a number of phone applications were already in use.
But lingering concerns about the Covid-19 pandemic could undermine people’s willingness to share cars and even use public transport. Passenger numbers on metro networks in most major cities remain well below pre-pandemic levels, and governments are seeking to cut back on their financial support.
Using trucks more economically for long haul and short haul deliveries could save 320,000 barrels a day, according to the IEA. But while this may seem obvious amid soaring fuel prices, the downside is that, unlike private cars, truck drivers don’t feel the immediate loss of higher diesel prices and thus don’t have the same incentive. to change your driving habits.
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Working from home and ditching business air travel sound like promising ideas for reducing fuel consumption. But the scope for increased work-from-home work is much smaller than it was before the pandemic, and many companies are already allowing employees to work remotely for at least part of the week. And if fewer business travelers mean half-empty planes rather than fewer flights, the impact will be limited.
The IEA is not making these proposals simply to cut off the flow of funds to the Kremlin. He is also extremely concerned about the looming oil supply crisis. Its latest market forecast, released on Wednesday, warned of the biggest supply disruption in three decades, with the possibility of losing at least 3 million barrels a day of Russian exports as early as next week.
Thus, if the IEA is correct about the supply shock, demand reduction will play a critical role in balancing the oil markets. But the extent to which his proposed measures will be taken is far from certain. As abhorrent as Russia’s invasion of Ukraine is, it’s unclear whether people in Europe and the US see changing their oil consumption habits as a necessary, effective, or adequate response.
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Calls for action to combat rising fuel prices focus on governments cutting taxes or supporting domestic oil production. There are few, if any, calls for mandatory fuel-saving measures.
Beyond the current crisis, the problem of oil demand must be addressed if the world is to achieve its long-term carbon reduction goals. Depriving President Vladimir Putin’s war machine of foreign funding through the sale of oil may be just what is needed to kickstart the process. If that happens, then the IEA’s path to Net Zero may begin to look less like the path to La La Land.
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Julian Lee is an oil strategist at Bloomberg. Previously, he worked as a senior analyst at the Center for Global Energy Studies.