The world’s demand for oil is set to “shrivel” before the end of the decade, according to the leading global energy authority on Tuesday.
Soaring prices and concerns over energy security caused by Russia’s invasion of Ukraine have hastened the decline as many countries rapidly shift to renewables, the International Energy Agency (IEA) report revealed. It’s an update to IEA findings last year which said oil demand would tail off in the mid-2030s.
Oil demand will still rise by six per cent between now and 2028 due to strong demand from the aviation industry and petrochemical sector.
Despite this, IEA says that “peak demand is in sight”.
Annual growth is expected to shrivel from 2.4 million oil barrels per day (mb/d) in 2023 to 400,000 mb/d in 2028.
The drop is attributed to the boom in electric vehicles, more efficient fuel standards, and increases in biofuel use.
“Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition,” said IEA Executive Director Fatih Birol.
The new forecast is based on current policies and market conditions, IEA notes, but oil demand could decline sooner if more ambitious action is taken.
Burning oil, gas and coal are creating the vast amount of emissions causing the global climate crisis.
Current climate-tackling efforts put the planet on a path to 2.7 degrees Celsius above pre-industrial times by the end of the century, according to Climate Action Tracker (the world has currently warmed around 1.1C).
To remain at the globally agreed limit of 1.5C would mean emissions being halved by 2030, and net zero reached around 2050.
Oil use has rebounded in the first half of 2023 largely due to China easing strict Covid restrictions. But this bounce is temporary, according to the report, with oil demand from Beijing slowing “markedly” from 2024.
While advanced economies transition to clean energy sources, gains will be more than offset by a booming petrochemical sector – for plastics, fertilisers, packaging and clothing – and fossil fuel use in emerging and developing nations.
The fossil fuel industry continues to plow hundreds of billions of dollars into new exploration, the IEA noted, with investments on track to reach the highest levels since 2015.
IEA notes that a number of factors could upend its forecast including global economic shocks, decisions by the oil-production nations in OPEC+, and changes in China’s refining industry.
The IPCC, the world’s leading climate science body, warns that avoiding catastrophic temperature rise and an ensuing parade of more destructive storms, wildfires, heatwaves and drought, means slashing fossil fuel use across society; rapid cuts to existing drilling, and no new infrastructure for oil, coal and gas.
The IEA along with an increasing number of global leaders support these findings.
