Page 6 - MEOG Week 42

MEOG COMMENTARY MEOG

IEA dismisses near-term peak in oil

demand, sees firm outlook for gas

OUTLOOK THE International Energy Agency (IEA) has would the world would need to do by 2030 to
warned of the unprecedented difficulty in fore- reach net-zero emissions in three decades’ time.
casting the future of energy in its latest outlook
TAKEAWAYS: report, after what it described as the biggest dis- Oil
• Oil demand will recover ruption to demand since the World Wars and Global energy demand is set to fall by 5% in
to pre-pandemic the Great Depression. This uncertainty largely 2020, the IEA predicts, with oil taking the hard-
levels by 2023 or 2027, centres around how quickly the global economy est hit out of the main fuels, with demand con-
depending on the pace will recover from the coronavirus (COVID-19) tracting by 8%.
of the global economic pandemic, but also shifting policies as countries However, the IEA’s report was more bullish
recovery. look to bring down their emissions. The Par- on oil than other recent outlooks such as BP’s,
• Without a significant is-based agency has nevetheless drawn several which warned that peak oil demand would
shift in policies, it is key conclusions. occur within a few years, or may never regain
too early to foresee In its 2020 World Energy Outlook, published the pre-pandemic level. In both STEPS and
a rapid decline in oil last week, the agency forecasted that oil demand DRS, demand flattens out in the 2030s. But a
consumption. would regain the pre-pandemic level sometime prolonged economic downturn will mean that
• Gas consumption was in the 2020s, with the exact timing depend- consumption will be 4mn barrels per day (bpd)
less affected by the ing greatly on the pace of the post-COVID-19 lower than in STEPS, keeping it below 100mn
crisis and will therefore recovery. The IEA has long resisted predictions bpd.
recover sooner. that peak oil demand is imminent, and its latest “The longer the disruption, the more some
• Gas will retain its outlook was no exception, forecasting that con- changes that eat into oil consumption become
current share in the sumption would remain flat or see modest gains engrained, such as working from home or avoid-
global energy mix even during the 2030s. ing air travel,” the IEA said. “However, not all the
if most countries align Gas consumption, which has fared better shifts in consumer behaviour disadvantage oil.
their policies fully with than oil and coal during the pandemic, will It benefits from a near-term aversion to public
the Paris Agreement. return to pre-crisis levels much sooner. Demand transport, the continued popularity of SUVs
• $70bn in gas will continue to grow over the coming decades, and the delayed replacement of older, inefficient
infrastructure as the fuel retains its role as the main provider of vehicles.”
investment will be stable power supply. “In the absence of a larger shift in policies, it
needed each year to Meanwhile, the IEA called time on coal, pre- is still too early to foresee a rapid decline in oil
support growth in Asian dicting that consumption would be unlikely to demand,” the IEA continued.
demand. return to pre-pandemic levels and that by 2040, Demand will be supported by rising incomes
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
of the Paris Agreement. But this year the agency through to 2030. In the following decade growth
has also included a Delayed Recovery Scenario slows to 0.1mn bpd per year. This means con-
(DRS). This is based on the same policy assump- sumption will exceed 104mn bpd in 2040, versus
tions as in STEPS, but projects a much slower 97.9mn bpd last year.
recovery from the pandemic, with the global In DRS, consumption does not get back to
economy only returning to its pre-crisis size in the pre-pandemic level until 2027 and flattens at
2023. In addition, the IEA has published a Net just under 100mn bpd. Under SDS, meanwhile,
Zero Emissions by 2050 case which sets out what demand contracts greatly to 92.5mn bpd in 2025,

P6 www. NEWSBASE .com Week 42 21•October•2020