Page 4 - AfrElec Week 42

AfrElec COMMENTARY AfrElec

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 a Net Zero Emissions by 2050 case, which sets
warned of the unprecedented difficulty in fore- out what the world would need to do by 2030 to
casting the future of energy in its latest outlook reach net-zero emissions in three decades’ time.
TAKEAWAYS : report, after what it described as the biggest dis-
Oil demand will recover ruption to demand since the World Wars and Oil
to pre-pandemic levels by the Great Depression. This uncertainty largely Global energy demand is set to fall by 5% in
2023 or 2027, depending centres around how quickly the global economy 2020, the IEA predicts. Oil takes the hardest hit
on the pace of the global will recover from the coronavirus (COVID-19) out of the main fuels, with demand contracting
economic recovery pandemic, but also shifting policies as countries by 8%.
look to bring down their emissions. The Par- However, the IEA’s report was more bullish
Without a significant shift is-based agency has nevertheless drawn several on oil than other recent outlooks such as BP’s,
in policies, it is too early key conclusions. which warned that peak oil demand would
to foresee a rapid decline In its 2020 World Energy Outlook, published occur within a few years, or may never regain
in oil consumption last week, the agency forecasted that oil demand its pre-pandemic level. In both STEPS and DRS,
would regain its pre-pandemic level sometime demand flattens out in the 2030s. But a pro-
Gas consumption was in the 2020s, with the exact timing depend- longed economic downturn will mean that con-
less affected by the crisis ing greatly on the pace of the post-COVID-19 sumption will be 4mn barrels per day lower than
and will therefore recover recovery. The IEA has long resisted predictions in STEPS, keeping it below 100mn bpd.
sooner that peak oil demand is imminent, and its latest “The longer the disruption, the more some
outlook is no exception, forecasting that con- changes that eat into oil consumption become
Gas will retain its current sumption would remain flat or see modest gains engrained, such as working from home or avoid-
share in the global during the 2030s. ing air travel,” the IEA said. “However, not all the
energy mix even if most Gas consumption, which has fared better shifts in consumer behaviour disadvantage oil.
countries align their than oil and coal during the pandemic, will It benefits from a near-term aversion to public
policies fully with the return to pre-crisis levels much sooner. Demand transport, the continued popularity of SUVs
Paris Agreement will continue to grow over the coming decades, and the delayed replacement of older, inefficient
as the fuel retains its role as the main provider of vehicles.”
Some $70bn in gas stable power supply. “In the absence of a larger shift in policies, it
infrastructure investment Meanwhile, the IEA called time on coal, pre- is still too early to foresee a rapid decline in oil
will be needed each year dicting that consumption would be unlikely to demand,” the IEA continued.
to support growth in return to pre-pandemic levels and that by 2040, Demand will be supported by rising incomes
Asian demand its share of the energy mix will shrink to under in emerging and developing economies, off-
20% for the first time since the industrial revolu- setting declines elsewhere. Even so, oil use for
tion. Solar power, on the other hand, will become passenger cars peaks in both STEPS and DRS,
the “new king of the world’s electricity markets,” thanks to improvements in fuel efficiency and a
the IEA said, thanks to its competitive costs. surge in electric car sales.
Overall renewables will overtake coal in usage “Upward pressure on oil demand increas-
by 2025. ingly depends on its rising use as a feedstock in
As in previous outlooks, the IEA has set the petrochemical sector,” the IEA said. “Despite
out its forecasts in a Stated Policies Scenario an anticipated rise in recycling rates, there is still
(STEPS), which reflects today’s announced plenty of scope for demand for plastics to rise,
policy intentions and targets, and a Sustainable especially in developing economies.”
Development Scenario (SDS), which assumes a In STEPS, oil demand rises by 5mn bpd in
surge in clean energy policies and investments 2021 and returns to pre-crisis levels by around
that puts the world on track to meet the goals 2023, rising thereafter by 0.7mn bpd annually up
of the Paris Agreement. But this year the agency until 2030. In the following decade growth slows
has also included a Delayed Recovery Sce- to 0.1mn bpd per year. This means consumption
nario (DRS). This is based on the same policy will exceed 104mn bpd in 2040, versus 97.9mn
assumptions as in STEPS, but projects a much bpd last year.
slower recovery from the pandemic, with the In DRS, consumption does not get back to
global economy only returning to its pre-crisis the pre-pandemic level until 2027 and flattens at
size in 2023. In addition, the IEA has published just under 100mn bpd. Under SDS, meanwhile,

P4 www. NEWSBASE .com Week 42 22•October•2020