Global peak in oil, gas, and coal demand expected this decade, IEA predicts

The demand for oil, gas, and coal is expected to peak globally in this decade for the first time by 2030. This anticipation arises as the utilization of cleaner energy sources and electric vehicles continues to rise. This insight comes from a news piece featuring the head of the International Energy Agency (IEA), as reported in the Financial Times on Tuesday.

According to the IEA’s forthcoming annual World Energy Outlook, scheduled for release next month, executive director Fatih Birol expressed that the world is on the brink of a significant turning point in an opinion piece published in the FT. This transition will carry significant implications for the battle against climate change, as it will expedite the peak in greenhouse gas emissions, noted Birol.

Birol pointed out that based on government policies across the globe, demand for these three fossil fuels is poised to reach its peak in the coming years. This, he highlighted, marks the first time that a peak in demand for each of these fuels is expected within this decade by 2030, and it is occurring sooner than many had initially anticipated.

The shift is primarily being driven by the remarkable growth of clean energy technologies and the adoption of electric vehicles. Structural changes in the Chinese economy and the consequences of the energy crisis also contribute to this shift.

The IEA had previously forecasted in a report released in June that a peak in global oil demand was in sight before the decade’s end, but this is the first time they have made a similar assessment for coal and gas.

Fatih Birol asserted that the increasing prevalence of electric vehicles is impacting oil demand. Gas demand is projected to decrease later in this decade in advanced economies, thanks to the growing use of heat pumps and renewable energy. Europe is also shifting away from Russian energy supplies following the conflict in Ukraine.

Birol further noted that coal demand will peak in the next few years, attributing this to declining investments in fossil fuels, the expansion of renewable energy, and the growth of nuclear power in China, a major consumer of coal.

Simone Tagliapietra, a climate expert and senior fellow at the Bruegel think tank in Brussels, commented that the IEA’s new projections illustrate that while progress remains gradual, the global energy transition is undeniably advancing. He pointed out that as technologies like wind and solar become cost-competitive, the transition is transitioning from being policy-driven to technology-driven, providing a measure of protection against political obstacles.

In a separate note, analysts at the Royal Bank of Canada acknowledged the IEA’s new projections as a testament to the success of pro-renewables legislation. However, they also highlighted the potential for policymakers to do more to accelerate the energy transition and phase-out of fossil fuels, particularly in debates concerning renewable returns and affordability across major economies.

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