The Brink of a New Age of Electricity: IEA Predicts Peak Fossil Fuel Demand by End of Decade
The world is on the cusp of a new era of electricity, with demand for fossil fuels expected to peak by the end of the decade, according to the International Energy Agency (IEA). This milestone could potentially drive investment into green energy and lead to a significant reduction in prices, enabling countries to dedicate more resources to clean energy.
Uncertainty Amidst Global Tensions
However, the IEA also flagged a high level of uncertainty, as conflicts in the Middle East and Russia continue to disrupt oil and gas supplies, and countries representing half of global energy demand prepare for elections in 2024. "In the second half of this decade, the prospect of more ample – or even surplus – supplies of oil and natural gas, depending on how geopolitical tensions evolve, would move us into a very different energy world," said IEA executive director Fatih Birol.
Surplus Fossil Fuel Supplies and the Shift to Clean Energy
The IEA believes that surplus fossil fuel supplies could lead to lower prices and enable countries to dedicate more resources to clean energy, moving the world into an "age of electricity." Renewable energy has seen rapid growth in recent years, with a record high level of clean energy coming online globally last year, including more than 560 gigawatts (GW) of renewable power capacity. Around US$2 trillion is expected to be invested in clean energy in 2024, almost double the amount invested in fossil fuels.
Peak Oil Demand and the Impact on Prices
In its scenario based on current government policies, global oil demand is expected to peak before 2030 at just less than 102 million barrels/day (mb/d), and then fall back to 2023 levels of 99 mb/d by 2035, largely due to lower demand from the transport sector as electric vehicle use increases. The report also lays out the likely impact on future oil prices if stricter environmental policies are implemented globally to combat climate change. Under the IEA’s current policies scenario, oil prices are expected to decline to US$75 per barrel in 2050 from US$82 per barrel in 2023.
The Future of LNG and Asian Prices
The report also forecast an increase in demand for liquefied natural gas (LNG) of 145 billion cubic metres (bcm) between 2023 and 2030, but this would be outpaced by an increase in export capacity of around 270bcm over the same period. The overhang in LNG capacity looks set to create a very competitive market at least until this is worked off, with prices in key importing regions averaging US$6.5-8 per million British thermal units (mmBtu) to 2035.
Conclusion
The IEA’s report highlights the significant changes that the energy landscape is going through, with the increasing importance of clean energy and the potential for surplus fossil fuel supplies to drive investment in the sector. However, the agency also acknowledges the uncertainty surrounding the global energy market, particularly in the face of conflicts and changing government policies. As the world moves towards a more sustainable energy future, it is essential to continue to monitor and address these uncertainties to ensure a smooth transition.
FAQs
Q: What is the IEA’s prediction for peak fossil fuel demand?
A: The IEA predicts that global oil demand is expected to peak before 2030 at just less than 102 million barrels per day (mb/d), and then fall back to 2023 levels of 99 mb/d by 2035.
Q: What is the impact of stricter environmental policies on oil prices?
A: The IEA’s current policies scenario predicts that oil prices will decline to US$75 per barrel in 2050 from US$82 per barrel in 2023.
Q: What is the forecast increase in demand for LNG?
A: The IEA forecasts an increase in demand for LNG of 145 billion cubic metres (bcm) between 2023 and 2030, but this will be outpaced by an increase in export capacity of around 270bcm over the same period.