Page 11 - NorthAmOil Week 42

NorthAmOil COMMENTARY NorthAmOil

IEA dismisses near-term peak in oil

demand, sees firm outlook for gas

The outlook for gas is stronger but the rate of growth will depend greatly on policy

GLOBAL THE International Energy Agency (IEA) has only returning to its pre-crisis size in 2023. In
warned of the unprecedented difficulty in fore- addition, the IEA has published a Net Zero
KEY TAKEAWAYS: casting the future of energy in its latest outlook Emissions by 2050 case, which sets out what the
• Oil demand will recover report, after what it described as the biggest dis- world would need to do by 2030 to reach net-
to pre-pandemic ruption to demand since the World Wars and zero emissions in three decades’ time.
levels by 2023 or 2027, the Great Depression. This uncertainty largely
depending on the pace centres around how quickly the global economy Oil
of the global economic will recover from the coronavirus (COVID-19) Global energy demand is set to fall by 5% in
recovery. pandemic, but also shifting policies as countries 2020, the IEA predicts. Oil takes the hardest hit
• Without a significant look to bring down their emissions. The Par- out of the main fuels, with demand contracting
shift in policies, it is is-based agency has nevertheless drawn several by 8%.
too early to foresee key conclusions. However, the IEA’s report was more bullish
a rapid decline in oil In its 2020 World Energy Outlook, published on oil than other recent outlooks such as BP’s,
consumption. last week, the agency forecasted that oil demand which warned that peak oil demand would
• Gas consumption was would regain its pre-pandemic level sometime occur within a few years, or may never regain
less affected by the in the 2020s, with the exact timing depend- its pre-pandemic level. In both STEPS and
crisis and will therefore ing greatly on the pace of the post-COVID-19 DRS, demand flattens out in the 2030s. But a
recover sooner. recovery. The IEA has long resisted predictions prolonged economic downturn will mean that
• Gas will retain its that peak oil demand is imminent, and its latest consumption will be 4mn barrels per day lower
current share in the outlook is no exception, forecasting that con- than in STEPS, keeping it below 100mn bpd.
global energy mix even sumption would remain flat or see modest gains “The longer the disruption, the more some
if most countries align during the 2030s. changes that eat into oil consumption become
their policies fully with Gas consumption, which has fared better engrained, such as working from home or
the Paris Agreement. than oil and coal during the pandemic, will avoiding air travel,” the IEA said. “However, not
• Some $70bn in return to pre-crisis levels much sooner. Demand all the shifts in consumer behaviour disadvan-
gas infrastructure will continue to grow over the coming decades, tage oil. It benefits from a near-term aversion
investment will be as the fuel retains its role as the main provider of to public transport, the continued popularity
needed each year to stable power supply. of SUVs and the delayed replacement of older,
support growth in Asian Meanwhile, the IEA called time on coal, pre- inefficient vehicles.” Gas consumption,
demand. dicting that consumption would be unlikely to “In the absence of a larger shift in policies, it
return to pre-pandemic levels and that by 2040, is still too early to foresee a rapid decline in oil which has fared
its share of the energy mix will shrink to under demand,” the IEA continued. better than oil
20% for the first time since the industrial rev- Demand will be supported by rising incomes
olution. Solar power, on the other hand, will in emerging and developing economies, off- and coal during
become the “new king of the world’s electricity setting declines elsewhere. Even so, oil use for
markets,” the IEA said, thanks to its competitive passenger cars peaks in both STEPS and DRS, the pandemic,
costs. Overall renewables will overtake coal in thanks to improvements in fuel efficiency and a
usage by 2025. surge in electric car sales. will return to pre-
As in previous outlooks, the IEA has set out its “Upward pressure on oil demand increasingly crisis levels much
forecasts in a Stated Policies Scenario (STEPS), depends on its rising use as a feedstock in the
which reflects today’s announced policy inten- petrochemical sector,” the IEA said. “Despite an sooner.
tions and targets, and a Sustainable Develop- anticipated rise in recycling rates, there is still
ment Scenario (SDS), which assumes a surge in plenty of scope for demand for plastics to rise,
clean energy policies and investments that puts especially in developing economies.”
the world on track to meet the goals of the Paris In STEPS, oil demand rises by 5mn bpd
Agreement. But this year the agency has also in 2021 and returns to pre-crisis levels by
included a Delayed Recovery Scenario (DRS). around 2023, rising thereafter by 0.7mn bpd
This is based on the same policy assumptions as annually up until 2030. In the following dec-
in STEPS, but projects a much slower recovery ade growth slows to 0.1mn bpd per year. This
from the pandemic, with the global economy means consumption will exceed 104mn bpd

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