Released November 04, 2024 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Global demand for crude oil is expected to decline during the 2030s and 2040s under three scenarios developed by the International Energy Agency (IEA) (Paris, France) in its recently released "World Energy Outlook 2024." The main reason for the decline in all cases is the anticipated rise in electric vehicles (EVs). Demand for oil declines by varying speeds and depths across three scenarios to 2050.
At 398 pages, this report, released October 16, is one of the weightier publications being released in advance of this month's 29th annual Conference of the Parties that signed the U.N. Framework Convention on Climate Change, or COP29, scheduled to take place in Azerbaijan November 11-22.
The "World Energy Outlook 2024" (WEO 2024) projected worldwide energy supply, demand and prices to 2050 under three scenarios, described below. It also analyzed various levels of production and demand for oil, natural gas, coal, nuclear and renewables, as well as different energy-using sectors, including transportation, buildings and industrial uses. Other topics it covered included energy security, carbon dioxide (CO2) emissions, the energy transition in wealthier and less-wealthy nations, geopolitics, electric vehicles, energy investment, clean energy supply chains and emerging sources of energy, such as low-emissions hydrogen and sustainable aviation fuel (SAF).
For more on the report's recommendations for reducing CO2 emissions from the Global South, or the world's less-wealthy nations, see November 1, 2024, article - IEA: To Defeat Global Warming, Boost Funding of Energy Transition in Global South.
The IEA's three scenarios are:
Global demand for oil averaged 99.1 million barrels per day (MMBBL/d) in 2023, the report said. Of that, about 42.7 MMBBL/d went to on-road vehicles. In the agency's STEPS case, road transport demand will rise slightly to about 43.3 MMBBL/d by 2030, then decline to about 40.2 MMBBL/d by 2035 and 34.8 MMBBL/d by 2050. Sharper declines in the 2030s and 2040s are seen in the APS and NZE scenarios.
Click on the image at right to see a graphic of declining global demand for oil from the transport sector to 2050 under three scenarios.
The on-road transport sector is the largest consumer of oil. Moving that sector off vehicles powered by internal combustion engines (ICE) and onto vehicles using electricity is a critical determinant for oil demand over the coming decades. "EVs provide the main mechanism to decarbonize the road transport sector," the "WEO 2024" report said. "Their prospects in recent years have been bolstered by ambitious plans from governments and the EV and battery industries."
The "WEO 2024" report said more than 7 million electric cars were sold in the first half of 2024, which represents an increase of close to 25% over comparable year-earlier sales. The share of EVs in the total global car fleet is likely to approach about 5% by the end of 2024, with most of that increase in demand coming from China, the report added.
Setting aside the large role played by China, though, the IEA report noted that EV demand is growing in other markets, such as the U.S. (10% year-over-year gain) and the U.K. (15% year-over-year growth). "Large jumps in year-on-year sales also occurred in nascent EV markets such as Brazil, Indonesia, Mexico, the Caspian region and the Middle East," it added.
In the STEPS case, which is basically business as usual, vehicles powered in part by electricity accounted for about 20% of new vehicles sold around the world in 2023. That number is expected to reach nearly 25% in 2024, as incentive programs and vehicle emissions restrictions around the world increasingly come into play. By 2050, in the STEPS case, EVs account for about 60% of new cars sold around the world. In the other two scenarios, APS and NZE, percentages would be higher.
For those who wonder if the agency's commitment to decarbonization might color its analysis, the IEA plotted its EV projections alongside forecasts from other organizations, including Boston Consulting Group, Barclay's, BloombergNEF, the U.S. Energy Information Administration, Exxon Mobil (NYSE:XOM) (Spring, Texas), Goldman Sachs, McKinsey & Company, Morgan Stanley, OPEC, the Rocky Mountain Institute and Shell plc (NYSE:SHEL) (London, England). By and large, the IEA projections are in the middle of the pack.
Click on the image at right to see IEA's projection of what percentage of new cars sold around the world will be powered, to some degree, by electricity through 2050 in the STEPS case.
India is expected to displace China as the market with the greatest demand growth for oil to 2035, when it will add about 2 MMBBL/d of demand, the report said.
To some extent, declining use of oil in the transport sector will be offset by a large increase in oil as a feedstock for petrochemicals.
The IEA estimated that OPEC+ currently has a record high of about 6 million barrels per day of unused production capacity, and that will rise to about 8 million by 2030 in the STEPS case as EVs gain market share versus ICEs.
A decline in demand and a rise in unused production capacity is expected to push down crude oil prices in the coming decades under all three of the IEA's cases. In the STEPS case, crude oil prices decline only marginally from current levels by 2050, but in the more aggressive NZE case, prices fall to as low as about $30 per barrel by 2050.
But there are exogenous factors that could upend the IEA's scenarios, including national political elections. "WEO 2024" noted that national elections are scheduled to take place this year in 65 countries that collectively account for about 50% of global energy demand.
One of those countries is the United States, the world's largest producer of oil and a country that accounts for about 14% of global energy demand. GOP presidential candidate Donald Trump has repeatedly summarized his energy policy as "drill, baby, drill," while Kamala Harris, the Democratic contender, has expressed support for continuing the Biden administration's energy and environmental policies, in which EVs play a significant role in decarbonizing the economy to meet the U.S. commitment to the Paris Agreement of 2015 limiting CO2 emissions.
National elections also are scheduled to take place this year in:
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
At 398 pages, this report, released October 16, is one of the weightier publications being released in advance of this month's 29th annual Conference of the Parties that signed the U.N. Framework Convention on Climate Change, or COP29, scheduled to take place in Azerbaijan November 11-22.
The "World Energy Outlook 2024" (WEO 2024) projected worldwide energy supply, demand and prices to 2050 under three scenarios, described below. It also analyzed various levels of production and demand for oil, natural gas, coal, nuclear and renewables, as well as different energy-using sectors, including transportation, buildings and industrial uses. Other topics it covered included energy security, carbon dioxide (CO2) emissions, the energy transition in wealthier and less-wealthy nations, geopolitics, electric vehicles, energy investment, clean energy supply chains and emerging sources of energy, such as low-emissions hydrogen and sustainable aviation fuel (SAF).
For more on the report's recommendations for reducing CO2 emissions from the Global South, or the world's less-wealthy nations, see November 1, 2024, article - IEA: To Defeat Global Warming, Boost Funding of Energy Transition in Global South.
The IEA's three scenarios are:
- Stated Policies Scenario (STEPS) is effectively the continuation of current actions, or business as usual
- Announced Pledges Scenario (APS) shows what would happen if all national energy and climate targets made by governments, including net zero goals, were met in full and on time, and
- Net-Zero Emissions by 2050 Scenario (NZE) maps out "an increasingly narrow path" to reach net zero emissions by mid-century in a way that limits long-term average temperature gain to 1.5 degrees Celsius over preindustrial times.
Global demand for oil averaged 99.1 million barrels per day (MMBBL/d) in 2023, the report said. Of that, about 42.7 MMBBL/d went to on-road vehicles. In the agency's STEPS case, road transport demand will rise slightly to about 43.3 MMBBL/d by 2030, then decline to about 40.2 MMBBL/d by 2035 and 34.8 MMBBL/d by 2050. Sharper declines in the 2030s and 2040s are seen in the APS and NZE scenarios.
The on-road transport sector is the largest consumer of oil. Moving that sector off vehicles powered by internal combustion engines (ICE) and onto vehicles using electricity is a critical determinant for oil demand over the coming decades. "EVs provide the main mechanism to decarbonize the road transport sector," the "WEO 2024" report said. "Their prospects in recent years have been bolstered by ambitious plans from governments and the EV and battery industries."
The "WEO 2024" report said more than 7 million electric cars were sold in the first half of 2024, which represents an increase of close to 25% over comparable year-earlier sales. The share of EVs in the total global car fleet is likely to approach about 5% by the end of 2024, with most of that increase in demand coming from China, the report added.
Setting aside the large role played by China, though, the IEA report noted that EV demand is growing in other markets, such as the U.S. (10% year-over-year gain) and the U.K. (15% year-over-year growth). "Large jumps in year-on-year sales also occurred in nascent EV markets such as Brazil, Indonesia, Mexico, the Caspian region and the Middle East," it added.
In the STEPS case, which is basically business as usual, vehicles powered in part by electricity accounted for about 20% of new vehicles sold around the world in 2023. That number is expected to reach nearly 25% in 2024, as incentive programs and vehicle emissions restrictions around the world increasingly come into play. By 2050, in the STEPS case, EVs account for about 60% of new cars sold around the world. In the other two scenarios, APS and NZE, percentages would be higher.
For those who wonder if the agency's commitment to decarbonization might color its analysis, the IEA plotted its EV projections alongside forecasts from other organizations, including Boston Consulting Group, Barclay's, BloombergNEF, the U.S. Energy Information Administration, Exxon Mobil (NYSE:XOM) (Spring, Texas), Goldman Sachs, McKinsey & Company, Morgan Stanley, OPEC, the Rocky Mountain Institute and Shell plc (NYSE:SHEL) (London, England). By and large, the IEA projections are in the middle of the pack.
India is expected to displace China as the market with the greatest demand growth for oil to 2035, when it will add about 2 MMBBL/d of demand, the report said.
To some extent, declining use of oil in the transport sector will be offset by a large increase in oil as a feedstock for petrochemicals.
The IEA estimated that OPEC+ currently has a record high of about 6 million barrels per day of unused production capacity, and that will rise to about 8 million by 2030 in the STEPS case as EVs gain market share versus ICEs.
A decline in demand and a rise in unused production capacity is expected to push down crude oil prices in the coming decades under all three of the IEA's cases. In the STEPS case, crude oil prices decline only marginally from current levels by 2050, but in the more aggressive NZE case, prices fall to as low as about $30 per barrel by 2050.
But there are exogenous factors that could upend the IEA's scenarios, including national political elections. "WEO 2024" noted that national elections are scheduled to take place this year in 65 countries that collectively account for about 50% of global energy demand.
One of those countries is the United States, the world's largest producer of oil and a country that accounts for about 14% of global energy demand. GOP presidential candidate Donald Trump has repeatedly summarized his energy policy as "drill, baby, drill," while Kamala Harris, the Democratic contender, has expressed support for continuing the Biden administration's energy and environmental policies, in which EVs play a significant role in decarbonizing the economy to meet the U.S. commitment to the Paris Agreement of 2015 limiting CO2 emissions.
National elections also are scheduled to take place this year in:
- India, which accounts for about 7% of global energy demand
- The European Union, which consumes about 6% of energy
- Russia, which accounts for about 5% of worldwide energy demand; and
- Iran, where 4% of the world's energy is consumed
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
