Long term global oil demand is set to fall by more than previously anticipated, according to the baseline scenario in the IEA's latest World Energy Outlook (WEO).
The Paris-based agency's stated policies scenario (Steps), which is based on prevailing policies worldwide, sees global oil demand — excluding biofuels — falling to 93.1mn b/d in 2050, compared with 97.4mn b/d in last year's WEO. This is mainly because of lower-than-previously expected oil use in transportation, particularly in shipping.
The Steps scenario still sees global oil demand peaking before 2030 at less than 102mn b/d, after which it falls to 2023 levels of 99mn b/d by 2035. This is mostly because of a rapid uptake of electric vehicles (EVs), reducing oil demand for road transport. EVs have displaced around 1mn b/d of gasoline and diesel demand since 2015 and are set to avoid 12mn b/d of oil demand growth between 2023 and 2035 under Steps, the IEA said.
The latest Steps scenario shows China's pre-eminence in global oil demand growth is fading, as the world's second largest oil consumer shifts towards electricity. Steps sees Chinese oil demand growing by just 1.2mn b/d to 17.4mn b/d by 2030, and then falling to 16.4mn b/d by 2035 and to 11.8mn b/d by 2050. India overtakes China as the world's main source of oil demand growth in Steps, adding almost 2mn b/d by 2035 and 2.4mn b/d by 2050. But its oil consumption in 2050 of 7.6mn b/d will still be lower than China's in the same year.
The IEA's latest baseline oil demand scenario widens the gap with producer group Opec, which sees oil consumption continuing to rise to 2050 "with the potential for it to be higher." Opec's World Oil Outlook (WOO) — released in September — bumped up its long-term oil demand forecast to 2045 by around 3mn b/d compared with its previous release. It extended its forecast period to 2050, when it put oil demand at 120mn b/d.
That equates to a 27mn b/d difference between the IEA and Opec baseline oil demand scenarios in 2050.
Binding contraction
The IEA said the slowdown in oil demand growth in its Steps scenario puts major resource owners, such as Opec+ countries, "in a bind" as they face a significant overhang of supply. Global spare oil production capacity of around 6mn b/d is set to rise to 8mn b/d by 2030 if announced projects go ahead, it said.
The Steps scenario sees global oil production falling from 96.9mn b/d in 2023 to 90.3mn b/d in 2050, with Opec increasing its share of output from 34pc to 40pc in the period. Steps sees US oil supply growth continuing to 2030 and then contracting by around 250,000 b/d a year on average between 2030-50. Brazil, Argentina and Guyana are seen adding more than 2.5mn b/d to supply by 2035.
The WEO explores two other scenarios — the announced pledges scenario (APS) assumes government targets on emissions are met in full and on time, while the net zero emissions by 2050 (NZE) scenario lays a path to limit global warming to 1.5°C. Oil demand in 2050 in APS and in NZE is lower compared with last year's WEO.
In APS, oil demand falls to 92.8mn b/d by 2030, 82mn b/d in 2035 and 53.7mn b/d by 2050 — with around 135mn more EVs on the road by 2035 compared with Steps. In NZE, oil demand falls to 78.3mn b/d by 2030, 57.8mn b/d by 2035 and 23mn b/d by 2050 — with 1.14bn more EVs on the road by 2035 compared with Steps.
