The International Energy Agency said Wednesday that global oil demand could decline sharply over the next five years as the shift to electric vehicles and other cleaner technologies almost completely halts global oil use growth. announced high.
“The transition to a clean energy economy is accelerating and global oil demand is set to peak by the end of the century,” Fatih Birol, executive director of the agency, said in a news release.
The assessment predicts that global gasoline use will decline after 2026. The outlook is bleak for OPEC and other oil producers.It raises the long-debated prospect of “Peak Oil” — the point where oil production peaks and begins to decline — but in this case the flattening would be due to weakening demand, not shrinking oil supply.
And the forecast comes amid a prolonged slump in oil prices after recent Saudi production cuts were not met.
Brent crude is currently priced at about $75 a barrel, about $1 below levels before Riyadh announced on June 4 a cut of 1 million barrels per day, equivalent to about 1% of global supply. .
Analysts say uncertainty about the outlook for global oil demand may be the reason for the market slump. The agency’s report is likely to reinforce fears among oil traders that China, which has driven growth in global oil demand for decades, is no longer doing its job.
China is by far the world’s largest market for electric vehicles, but its economic recovery from the “zero-corona” lockdown has not been as strong as some economists expected. Oil consumption growth is expected to slow, especially in the second half of the forecast to 2028.
Henning Groustein, director of political risk firm Eurasia Group, said: “China’s economic recovery from the coronavirus is fading the perception that China is not generating the same growth in oil demand as it was before the pandemic. ‘ said.
The International Energy Agency, which monitors energy trends on behalf of developed countries, expects more than 155 million electric vehicles to be sold worldwide by the end of 2028, half of them in China. . These vehicles mean that the 3 million barrels per day of oil that could have been consumed would instead be left in the ground.
In fact, the agency is more positive about the near-term outlook for oil than some other forecasters. The report forecasts a strong increase in global demand to 2.4 million barrels per day in 2023, a slight increase from a report released last month that some analysts are optimistic about. I think it’s too much.
However, in the years that followed, the growth of electric vehicles, the growth of so-called biofuels (which generate energy from resources such as agricultural waste and used cooking oil), and increased efficiency, especially road transport. officials say is slowing. .
The agency expects gasoline consumption, which accounts for about a quarter of the world’s demand for petroleum products, to decline after 2026.
Growth in the aviation industry, where petroleum is difficult to replace, and demand for petrochemicals (especially used to make a wide range of materials such as plastic bags, patio furniture and auto parts) will be the main pillars of future growth. . agency says.
The agency said planned investment in oil and gas production was 47% below 2014 levels in real terms, reflecting the expected slowdown in oil demand growth and the impact of the pandemic. However, the industry expects him to increase such spending by 11% in 2023.
Much of the spending is in the Middle East, where Saudi Aramco and Abu Dhabi state oil company Adnok are ramping up production capacity.
While some of Europe’s oil giants have tolerated a gradual decline in crude production, Shell said Wednesday it would keep production steady through the end of 2010 to keep it raking in cash.