Oil demand has been on a roller coaster ride over the past five years due to a global pandemic, wars and other economic pressures.
This occurred against the backdrop of the rising power of the United States shale productioncountries tightly control how much oil is released and the world shifts to alternative energy sources.
All these factors will result in a “staggering” oil surplus by 2030 that will far exceed demand, the International Energy Agency (IEA), the global energy watchdog based in Paris. a report Wednesday.
Oil demand will gradually slow down, reaching its peak by 2029 and plateau thereafter. The IEA projects that oil supply will reach 114 million barrels per day by the end of the decade, about 8 million barrels per day more than demand.
“This would result in levels of unused capacity not seen before except at the height of the Covid-19 lockdowns in 2020,” the IEA said.
“Such a massive oil production reserve could lead to lower oil prices, posing difficult challenges for producers in the US shale basin and the OPEC+ bloc.”
Facing electrification
Although supply will exceed demand in the coming years, oil demand will still be slightly higher in 2030 compared to current levels, thanks to strong appetite from Asian markets like India and China.
“In contrast, oil demand in advanced economies is expected to continue its decades-long decline,” the report said, adding that the only other exception to such weak demand was in 1991, when major events like the Gulf War and Soviet Union. the dissolution took place. Advanced economies will see oil demand decline by 3 million barrels per day by 2030.
Even economies with relatively higher oil consumption will have to contend with the growing presence of electric vehicles and energy efficiency methods aimed at reducing or offsetting carbon emissions.
The IEA predicted last year that fossil fuels were at the “beginning of the end” as a shift in the energy sector was underway. The energy agency warned that the demand forecasts in its latest report were subject to economic volatility, changes in the pace of electric vehicle adoption and more.
Oil prices also vary widely: earlier this week, both oil indexes, Brent and West Texas Intermediate, rose on reports that oil production would climb Later this year. The summer is expected to bring increased demand for oil, although uncertainties, such as those related to interest rates, still weigh on how the product is priced.
However, overall, it is the slowdown in demand that will dominate the future of the oil industry.
THE gap in demand and supply will impact the stronghold of the OPEC+ alliance, which includes the world’s major oil producers and their allies. The group, led by Saudi Arabia and the United Arab Emirates, ensured oil production for years to moderate prices. Rising oil prices are more lucrative for economies, including Russia, that rely on oil exports to fill their coffers.
The reduction in demand will create a “massive cushion” and disrupt how OPEC+ is addressing its oil production strategy moving forward, the IEA said. It also means the group’s share of oil production will fall below 50% starting this year, paving the way for other non-OPEC+ members like Brazil and Norway.
The OPEC secretary general is not sure the situation is in decline. IEA forecasts were ‘dangerous’, Haitham Al Ghais told Financial Times Wednesdayand added that if investors stopped pumping money into the oil and gas industry, the resulting “energy chaos” would be “of potentially unprecedented scale.”
Yet it appears that the sun is indeed setting for fossil fuels, sooner rather than later.
This story was originally featured on Fortune.com
