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Economic outlook, energy transition to curb oil demand growth from 2024

Strong demand from China and India boosted outlook for growth this year by almost 300,000 bpd

The boost to oil demand from the post-pandemic recovery is set to end this year, the International Energy Agency (IEA) said on Wednesday, with a slowing economy and the transition to cleaner fuels sapping growth from 2024.

Strong demand from China and India boosted the Paris-based agency’s outlook for growth this year by almost 300,000 barrels per day (bpd) to 2.4 million bpd, but that will fall by nearly two-thirds due in large part to more use of electric cars.

“The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance,” said IEA Executive Director Fatih Birol.

Global upstream investments in oil and gas exploration, extraction and production this year are due to reach $528 billion, the highest level since 2015, and are on course to keep the world adequately supplied through 2028, the IEA said.

The agency did not expressly reiterate a projection from 2021 that investors should not fund new oil, gas and coal supply projects for the world to reach net-zero emissions by 2050.

It said however that current investment “exceeds the amount that would be needed in a world that gets on track for net zero emissions”.

“For total oil demand to decline sooner, in line with the IEA’s Net Zero Emissions by 2050 Scenario..., additional policy measures and behavioural changes would be required,” the IEA said.

The agency expects economic headwinds to cut growth to 860,000 bpd next year and just 400,000 bpd in 2028, for overall demand of 105.7 million bpd versus 102.3 million bpd in 2023.

“The slowdown has been hastened by Russia’s invasion of Ukraine amid heightened energy security concerns and by governments’ post-Covid recovery spending plans, with more than $2 trillion mobilised for clean energy investments by 2030,” the IEA said.

Demand for oil from combustible fossil fuels, excluding biofuels, petrochemical feedstocks and other non-energy uses, is set to peak at 81.6 million bpd in 2028, it said, adding that oil demand for transport is due to peak in 2026.