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Aerial photo of an oil tanker at anchor. Stock Photo: Nickeo23/Shutterstock

Aerial photo of an oil tanker at anchor. Stock Photo: Nickeo23/Shutterstock

IEA Predicts Global Oil Demand Peaking This Decade

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October 24, 2023

(Bloomberg) —

Global demand for oil will reach its peak this decade, the International Energy Agency predicted for the first time, amid growing popularity of electric cars and the cooling of China’s economy.

The predicted peak, which the agency also anticipates for coal and natural gas, doesn’t mean a rapid plunge in fossil fuel consumption is imminent. It will probably be followed by “an undulating plateau lasting for many years” with emissions remaining too high to limit global warming to 1.5C, the IEA said. 

The world will consume as much as 102 million barrels a day of oil by the late 2020s, with the volumes dropping to 97 million barrels a day by mid-century, according to the base-case, called the Stated Policies Scenario, laid out on Tuesday in the IEA’s annual World Energy Outlook. Play Video

“The transition to clean energy is happening worldwide and it’s unstoppable,” IEA Executive Director Fatih Birol said in a statement. “Claims that oil and gas represent safe or secure choices for the world’s energy and climate future look weaker than ever.”

The view of the IEA, which advises industrialized nations on energy policy, stands in contrast to the forecasts of the Organization of Petroleum Exporting Countries. In its own annual outlook published earlier this month, the producers group predicted oil demand would keep growing for decades to come, reaching 116 million barrels a day in 2045. 

Oil demand in the petrochemicals, aviation and shipping industries will continue to increase to 2050 but it won’t be enough to offset lower demand from road transport amid “astounding rise in electric vehicle sales,” the IEA said. China, which has for years driven the growth in global crude consumption, will see its appetite weakening over the next few years, with total consumption declining in the long run, according to the report. 

Global oil consumption will follow the same path as demand for other hydrocarbons. “We are on track to see all fossil fuels peak before 2030,” the IEA said. It’s the first time all scenarios drawn up by the Paris-based agency for global energy markets point to a near-term decline in hydrocarbon consumption.

The IEA’s base-case reflects energy policies currently pursued by governments worldwide and the continued ramifications of last year’s energy crisis. The IEA’s second scenario, which assumes all governments meet their energy and climate pledges in full and on time, envisions global oil demand peaking at 93 million barrels a day in 2030, with a decline to 55 million barrels per day in 2050. The third, a net zero emissions scenario in which global warming is limited to 1.5C, would see global demand plunging to 77 million barrels a day in 2030 and just under 25 million barrels a day in 2050. 

OPEC’s Grip

The process of decarbonizing the global economy “will be a long one and fossil fuel producers remain influential” in the years to come, according to the report.

In the base-case, Russia and the Organization of Petroleum Exporting Countries will keep their combined share of the oil market at 45% to 48% until the end of this decade. By the middle of the century, that will rise above 50% thanks to higher production in Saudi Arabia, the de-facto OPEC leader. 

Russia, on the other hand, is set to lose some 3.5 million barrels a day, or roughly a third, of its oil production by 2050, “as it struggles to maintain output from existing fields or to develop large new ones,” the IEA said. 

The IEA also assumes that in the years to come Iran and Venezuela will be able to grow their output thanks to a gradual relaxation of international sanctions. 

However, over time the market power of major oil producers will decline, the agency warned. 

“In exercising this influence they reduce it, because consumers have an increasing range of mature clean energy options that become more attractive,” according to the report. 

© 2023 Bloomberg L.P.

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