IEA: Too early to write obituary for oil

Oil shouldn’t be written off too early, despite the expected sharp rise in gas and renewables over the next 25 years.

This is according to the International Energy Agency which forecasts that over the next 25 years, the growing energy needs will be met by renewables and gas first.

In its World Energy Outlook 2017, the organization said the energy market transformation would be spurred by the deep declines in the cost of renewables and growing electrification, also boosted by a client and more diversified energy mix in China.

“Over the next 25 years, the world’s growing energy needs are met first by renewables and natural gas, as fast-declining costs turn solar power into the cheapest source of new electricity generation. Global energy demand is 30% higher by 2040 – but still half as much as it would have been without efficiency improvements. The boom years for coal are over — in the absence of large-scale carbon capture, utilization and storage (CCUS) — and rising oil demand slows down but is not reversed before 2040 even as electric-car sales rise steeply,” the IEA said.

Don’t write off oil

Despite the sharp rise in renewables, IEA said it would be far too early to write off oil.

In IEA’s outlook for oil, global oil demand continues to grow to 2040, although at a steadily decreasing pace – while fuel efficiency and rising electrification bring a peak in oil used for passenger cars, even with a doubling of the car fleet to two billion. But other sectors – namely petrochemicals, trucks, aviation, and shipping – drive up oil demand to 105 million barrels a day by 2040.

“Electric vehicles (EVs) are in the fast lane as a result of government support and declining battery costs but it is far too early to write the obituary of oil, as growth for trucks, petrochemicals, shipping and aviation keep pushing demand higher. The US becomes the undisputed leader for oil and gas production for decades, which represents a major upheaval for international market dynamics,” said Dr Fatih Birol, the IEA’s executive director.

While carbon emissions have flattened in recent years, the report finds that global energy-related CO2 emissions increase slightly by 2040, but at a slower pace than in last year’s projections. Still, this is far from enough to avoid severe impacts of climate change, IEA said.

Offshore Energy Today Staff