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Oil demand to peak by 2030 as EVs gain traction: IEA

Demand growth will be led by India, China, other Asian nations, Africa, and the Middle East

Published: Sun 29 Oct 2023, 5:12 PM

Updated: Sun 29 Oct 2023, 5:13 PM

By
Issac John

Global demand for oil will reach its peak this decade amid the growing popularity of electric cars and the cooling of China’s economy, the International Energy Agency predicted for the first time.

The expected demand peak by 2030, which the agency also anticipates for coal and natural gas, doesn’t mean a rapid plunge in fossil fuel consumption is imminent. It will probably be followed by “an undulating plateau lasting for many years” with emissions remaining too high to limit global warming to 1.5C, the world’s leading energy agency said.

The remarkable shift in energy consumption will be partly driven by policies that countries have already adopted to promote cleaner forms of energy and transportation, the IEA noted, adding that road transport would no longer be a source of oil demand growth by the end of the decade.

The forecast puts the Paris-based agency at odds with a number of other organisations after Opec's latest long-term scenario document ducked any forecast of peak oil consumption before 2045. Opec anticipates demand to continue rising until 2045 and climb to 116 million barrels per day, 6.0 million barrels per day more than it predicted last year.

This demand growth will be led by India, China, other Asian nations, Africa, and the Middle East.

The IEA dismissed industry fears of under-investment in oil and gas resources. "The fears expressed by some large resource holders and certain oil and gas companies that the world is underinvesting in oil and gas supply are no longer based on the latest technology and market trends," it said. "At the same time, they underline the economic and financial risks of major new oil and gas projects, on top of their risks for climate change."

Opec has warned that a lack of future investment in the oil sector is set to jeopardise global energy security and could send crude prices to $100 a barrel.

Opec General Secretary Haitham Al Ghais said recently that the global oil industry requires a total investment of at least $12 trillion between now and 2045 to prevent a spike in energy prices, warning underinvestment in the oil sector is dangerous. “By underinvesting, we are actually endangering energy security,” he said, echoing the viewpoint of the UAE Energy Minister Suhail Al Mazrouei, who has stressed the need to continue investment in oil and gas alongside energy transition commitments.

"A legacy of the global energy crisis may be to usher in the beginning of the end of the fossil fuel era: the momentum behind clean energy transitions is now sufficient for global demand for coal, oil, and natural gas to all reach a high point before 2030," the IEA said, referring to its least ambitious energy transition scenario, called the Stated Policies Scenario.

The world will consume as much as 102 million barrels a day of oil by the late 2020s, with the volumes dropping to 97 million barrels a day by mid-century, IEA’s annual World Energy Outlook said.

“The transition to clean energy is happening worldwide and it’s unstoppable,” IEA executive director Fatih Birol said in a statement. “Claims that oil and gas represent safe or secure choices for the world’s energy and climate future look weaker than ever.”

The agency lowered its 2050 oil demand projection by 2.4 million barrels per day to 54.8 million bpd along with 0.5 million bpd. Within oil producing nations, Opec accounts for 45 per cent of the 2050 oil supply in the Announced Pledges scenario in the latest report, up from 42 per cent in last year's report.

The report acknowledges Russian production has been "more resilient than initially anticipated" in the face of US and EU-led sanctions. However, under its least ambitious scenario for cutting global emissions, Russia still "struggles to maintain output from existing fields or to develop large new ones," with its output dropping by 3.5 million bpd by 2050, it said.