The long term demand and supply forecasts of International Energy Agency remains unchanged regardless of the Paris Climate Change Agreement of 2015 coming into effect. This followed their expressed expectations stating that the oil consumption of the world will not peak any time sooner before the year 2040.
The Paris treaty aimed at slashing down detrimental emissions has a long term goal of halting the reliance on fossil fuels on the globe by the century’s second half. This is in an effort to curb the average increase in global temperatures by 2oC (3.6oF) above that of pre-industrialization.
“The snags in finding an alternative fuel for aviation, petrochemicals and road freight simply means that the growth of these three sectors only is much higher than the oil demand of the planet up to the year 2040”, said IEA during their yearly World Energy Outlook.
Looming fossil fuel legislations
It is estimated that from 2020, EU will enact stronger legislations that will help control emissions by vehicles. Many expect that this will quickly wean off the traditional reliance on fossil fuels like diesel and gasoline the major oil demand sources.
IEA’s report has three oil demand and supply scenarios. In its main scenario, IEA assumes that the participating nations will try to meet the Paris accord requirements and environmental legislations. In the “450 scenario”, IEA assumes that the cosigners will stick to the Paris agreement and the demand for oil will decrease sharply. As for their “current policies” scenario, the Paris accord has not been factored.
Oil demand drop-off
The “450 scenario” of IEA predicts that the rising need for electric vehicles and biofuel consumption will cut the demands for oil. “Global demand for oil will peak by the year 2020 as predicted by the 450 scenario. The ensuing demand decline will accelerate year after another by late 2020s until it start falling by more than 1 million barrels per day each year.”, said IEA.
However, in the outlook of Current Policies, IEA estimates that the global supply will increase to reach 11.6 million barrels per day by the year 2040.