The end of the oil era in sight? The International Energy Agency (IEA) for the first time outlines a peak in global oil demand “before the end of the decade” thanks to the rise of the electric car, but public authorities and citizens will have to take action so that demand declines “earlier”.
“The transition to a clean energy economy is accelerating, with peak global oil demand in sight before the end of this decade as electric vehicles, fuel efficiency and other technologies advance” said Fatih Birol, executive director of the IEA, in a statement on Wednesday.
In its 2023 oil report, a five-year view of the market, the IEA estimates that global demand will continue to increase, however its growth “is expected to slow significantly by 2028”.
In its previous “World Energy Outlook” report for 2022, the IEA, an offshoot of the Paris-based OECD, already saw “global oil demand rebound despite high prices, peak and stabilize after 2035”.
But the energy crisis initiated with the post-COVID recovery in 2021 and greatly aggravated by the war in Ukraine in 2022 has upset the timetable: “high prices” of energy and “problems of security of supply” highlighted by this unprecedented crisis, are accelerating “the transition to cleaner energy technologies”, underlines the IEA.
According to its forecast, gasoline demand will decline after 2023 and “the use of oil as a transport fuel is expected to decline” after 2026, as cars go electric.
In developed OECD countries, this will even translate into a decline in the thirst for oil as early as 2024.
However, not all countries and sectors are moving at the same speed: this downward movement should be slowed by the “booming” demand for petrochemical products, and the strong growth in consumption in emerging economies which “will largely offset » the contraction of demand in advanced economies, underlines the IEA.
“Based on current government policies and market trends, global oil demand will increase by 6% between 2022 and 2028 to reach 105.7 million barrels per day (mb/d) — supported by strong demand from sectors petrochemicals and aviation”, note the experts.
“Despite this cumulative increase, annual demand growth is expected to contract, from ‘2.4 mb/d this year to just ‘0.4 mb/d in 2028, suggesting a peak in demand.”
Bringing down demand “sooner, in line with the IEA’s scenario of net zero emissions by 2050,” would require “additional policy measures and behavioral changes,” the agency points out.
Record oil investments
Oil markets are “reconfiguring slowly” after three years of slump marked by the pandemic, then by the Russian invasion of Ukraine, recalls the IEA.
In the coming months, they “could tighten considerably” under the effect of the “production cuts of the OPEC + alliance” which intend to support prices. These constraints could, however, “ease in the coming years”, according to the report.
The late lifting of drastic anti-COVID restrictions in China at the end of 2022 admittedly led to “a rebound in post-pandemic oil demand in the first half of 2023”, but the IEA sees this growth in demand “significantly slowing from 2024”.
Additionally, global investment “in oil and gas exploration, extraction and production is on track to reach its highest levels since 2015, rising 11% year-on-year to $528 billion.” in 2023”, in contradiction with the efforts needed to contain 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 main world oil producers maintain their plans to increase their production capacities”, the level of these investments would be sufficient to meet demand.
But it “exceeds the quantity that would be necessary” for a world aiming for carbon neutrality in 2050. Hence an appeal from the IEA to the oil world to “calibrate its investments to ensure an orderly transition”.