The world will continue to use more oil through this decade, despite the pandemic that has slowed down travel and altered how people live and work.
A new outlook released on Tuesday by the International Energy Agency offers a stark contrast to many in the energy industry who see “peak oil” use as a much nearer possibility.
Just last month, European oil and gas giant BP projected that demand may never reach its pre-coronavirus levels again, especially if the world begins to cut carbon emissions in line with the Paris climate agreement.
Government restrictions to combat the coronavirus led to the biggest oil market crash in history, with global demand expected to fall 8% this year on an annual basis, the IEA said.
At its worst, oil demand in April declined by more than 20 million barrels per day from normal consumption of 100 million barrels per day, leading to prices falling below zero at one point and contributing to dozens of bankruptcies of oil and gas producers.
But oil consumption will grow by 5 million barrels per day next year and edge ahead of pre-pandemic levels by 2023, increasing by 0.7 million barrels per day annually on average the rest of the decade, assuming no significant policy changes to encourage alternatives, such as electric vehicles.
Global oil demand will finally plateau or peak beginning in 2030.
“In the absence of a larger shift in policies, it is still too early to foresee a rapid decline in oil demand,” the IEA wrote in its annual “World Energy Outlook.”
To be sure, IEA projects oil consumption in 2030 will be 2 million barrels per day lower compared with the agency’s forecast last year, before the pandemic occurred.
But oil demand has rebounded quickly after previous crises, resuming growth as the economy recovered, and this instance could be no different.
That’s because oil demand will continue to grow in developing countries such as China and India, increasing by nearly twice the size of the decline in consumption expected in advanced economies such as the United States and Europe this decade.
Meanwhile, the dramatic changes in human behavior in 2020 won’t have much effect on oil demand in the long run.
Increased teleworking, fewer business flights, and delayed new car purchases will reduce oil demand, but other changes such as shifting away from mass transit to personal vehicles and delaying the replacement of old cars could actually push up oil consumption.
Taken together, these behavior changes will cause demand to increase by about 50,000 barrels per day in the year 2030.
There are also other uses for oil poised to grow after the pandemic.
While road transportation accounted for 60% of oil demand growth in the 2010s, petrochemicals used in plastics will make up 60% of growth this decade because of rising demand for things such as personal protective equipment, packaged foods, and other goods.
One big loser from the pandemic is clear, though: coal.
Coal demand was already suffering due to competition from natural gas and renewables, but IEA projects that now, coal won’t return to pre-pandemic levels ever again.
In the U.S., coal consumption will end this decade down by 50%.
