In its 2018 World Energy Outlook, the International Energy Agency says improvements in the efficiency of the non-electric car fleet will cut oil demand by over 9 million barrels per day in 2040. Shutterstock photo.
Oil demand not expected to peak before 2040
In its 2018 World Energy Outlook, the International Energy Agency says electric vehicles along with more efficient fuel technology will reduce transportation oil demand more than previously forecast, however, the world may still face a global crude supply crunch without more investment in oil production.
The Paris-based agency says demand for crude oil is not expected to peak before 2040.
According to the WEO report, oil demand is forecast to grow by about 1 million barrels per day (b/d) on average every year until 2025. Post-2025, oil demand is expected to then grow by 250,000 b/d until 2040 when it will peak at 106.3 million b/d.
“In the New Policies Scenario, demand in 2040 has been revised up by more than 1 million b/d compared with last year’s outlook largely because of faster near-term growth and changes to fuel efficiency policies in the United States,” the agency said.
By 2040, the IEA predicts there will be about 300 million electric vehicles on the road, cutting crude demand by 3.3 million b/d. This is higher than the loss of 2.5 million b/d IEA had estimated last year in its WEO.
“… Efficiency measures are even more important to stem oil demand growth: improvements in the efficiency of the non-electric car fleet avoid over 9 million b/d of oil demand in 2040,’ the IEA said.
By 2040, oil demand for road transportation is expected to hit 44.9 million b/d, up from the IEA’s 2017 estimate of 41.2 million b/d. Industrial and petrochemical demand is expected to grow significantly to 23.3 million b/d, up from 17.8 million b/d in 2017.
According to the IEA, developing economies led by China and India will be the driving factor behind rising oil demand. The global car fleet is expected to nearly double by 2040 from today, rising 80 per cent to 2 billion.
Advanced economies are expected to see a fall in oil demand by over 400,000 b/d on average each year to 2040.
The IEA forecasts the United States to increase its crude supply significantly to 2025, rising by 5.2 million b/d from current levels of about 11.6 million b/d.
After 2025, the IEA expects that US crude production will decline and OPEC’s share of the market will climb to 45 per cent by 2040, up from nearly 30 per cent currently.
The IEA concludes that new sources of oil supply will be required, whether or not oil demand peaks, says the IEA.
“The analysis shows oil consumption growing in coming decades, due to rising petrochemicals, trucking and aviation demand. But meeting this growth in the near term means that approvals of conventional oil projects need to double from their current low levels,” IEA director Fatih Birol said.
“Without such a pick-up in investment, U.S. shale production, which has already been expanding at record pace, would have to add more than 10 million b/d from today to 2025, the equivalent of adding another Russia to global supply in seven years – which would be an historically unprecedented feat.”