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IEA dismisses near-term peak in oil

demand, sees firm outlook for gas

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

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