Renewables, EVs Set To Reduce Global Oil Demand, Says Report

Global Oil Demand To Be Tempered By Clean Energy Transition: Report

A latest report from the International Energy Agency (IEA) said that the global oil demand is likely to be tempered by clean energy transition. The report also said that the surge in Electric Vehicle (EV) sales and continued efficiency improvements of vehicles and use of more renewables in electricity production could negate the rise in global oil demand.

The report said that based on today’s market conditions and policies, global oil demand will level off at around 106 mb/d towards the end of the decade amid the accelerating transition to clean energy technologies. 

“Surging EV sales and continued efficiency improvements of vehicles, and the substitution of oil with renewables or gas in the power sector, will significantly curb oil use in road transport and electricity generation,” it said.

The report said that the rise in demand of oil is likely to come from the emerging economies in the world like China and India. “Divergent regional economic trajectories and the accelerating deployment of clean and energy-saving technologies are combining to progressively slow the pace of oil demand growth, with a plateau emerging in the final years of our forecast, which runs to 2030. Emerging economies in Asia, particularly China and India, account for all of global demand growth. By contrast, oil demand in advanced economies falls sharply,” the IEA report said.  

It noted that the eastward shift to non-OECD Asia, especially China and India, is coinciding with a multitude of new challenges driving oil market activity as the energy transition gathers pace. “Emerging economies in Asia, particularly China and India, account for all of global demand growth. By contrast, oil demand in advanced economies falls sharply.

The report said that in India, transport fuels are likely to take up the oil demand. “In China, growth is set to be driven by the petrochemical sector as rapid deployment of clean energy technologies and massive infrastructure investments in high-speed rail blunt demand for transport fuels. In India, transport fuels will defy the global trend, rising sharply. Significant gains will also come from other emerging and developing economies in Asia,” the report said. 

This significant rise in non-refinery product supplies will add pressure on operating rates and refinery profitability, especially in mature demand centres, it said. 

“That raises the prospect of further capacity closures by the end of the decade. Capacity growth will remain concentrated in Asia, most notably in China and India, but post-2027 there are signs of expansions slowing,” the IEA report said.