Oil demand peaks under all scenarios in IEA WEO

Global oil demand peaks under all three of the scenarios in the IEA's latest World Energy Outlook (WEO).

The Stated Policies Scenario (STEPS), which is based on prevailing policies worldwide, has global oil demand rising to 102.4mn b/d by 2030, up from 94.5mn b/d last year, with China, India and southeast Asia accounting for more than 60pc of that increase. Demand then peaks in the mid‐2030s at around 103mn b/d as reductions in advanced economies outweigh growth in emerging market and developing economies, before dipping to 102.1mn b/d by 2050.

"There is continued growth in the use of oil for aviation and shipping, as a petrochemical feedstock, and as fuel in heavy trucks, but from the mid‐2030s this is more than offset by declining oil use in other sectors, especially in passenger cars, buildings and power generation," the IEA said.

On the supply side, the STEPS assumes that Russian oil production sheds 2mn b/d in the near term as a result of European and US sanctions, and that it stays well below pre-Ukraine war projections in the long term. The US, Middle East Opec producers, Guyana and Brazil account for the largest production increases this decade. And Opec's share of oil output rises from 35pc in 2021 to 36pc in 2030 and 43pc in 2050.

The WEO explores two other scenarios — the Announced Pledges Scenario (APS) assumes government targets on emissions are met in full and on time, and the Net Zero Emissions by 2050 Scenario (NZE) lays a path to limit global warming to 1.5°C and achieve "universal access to modern energy by 2030".

Global oil demand peaks in the mid-2020s at 98mn b/d under the APS, with faster electrification in the transport and buildings sectors helping governments meet their climate pledges. Use of oil for petrochemical feedstocks also grows more slowly under this scenario than under the STEPS. Under the NZE scenario, oil demand already peaked back in 2019 and drops by 20mn b/d between 2021 and 2030, with 15mn b/d of that reduction in advanced economies.

Global energy crisis

The WEO highlights the scale of disruption in energy markets this year and notes that subdued investment in 2015-20 has made the sector much more vulnerable to this than it would have been otherwise. "The world is in the midst of the first truly global energy crisis, with impacts that will be felt for years to come," IEA executive director Fatih Birol said.

Birol places much of the blame on Russia's invasion of Ukraine and rejects suggestions that accelerated transition targets have compromised energy security. "When people misleadingly blame climate and clean energy for today's crisis, what they are doing, whether they mean to or not, is shifting attention away from the real cause — Russia's invasion of Ukraine," he said.

The IEA notes that energy markets remain "extremely vulnerable" due to "unrelenting geopolitical and economic concerns", including rising inflation, a possible global recession and a "huge $2 trillion windfall for fossil fuel producers above their 2021 net income". But it also flags the emergence of longer-term measures to protect consumers from the energy crisis, pointing to government policies to reduce inflation, set clean energy targets and increase the share of nuclear and renewable resources in national energy mixes.

Under the STEPS, these initiatives drive global clean energy investment up by more than 50pc from today's levels to over $2 trillion/yr by 2030. But this is insufficient to meet the Paris climate agreement goals. "It would need to be above $4 trillion by the same date in the Net Zero Emissions by 2050 Scenario," the IEA said.

By Ruxandra Iordache