A MATTER OF FACT by Deborah Jaremko DON’T BET ON A COLLAPSE IN OIL DEMAND
make countless plastic and synthetic products – everything from clothing, computers, cell phones, car components and furniture, to medical equip- ment, plexiglass, hand sanitizer, carpets, toys, and beauty products. “In 2020 we saw oil demand fall by 10 million barrels per day, but as you will see, 2021 forecasts show a rebound in demand of about 5 to 6 million barrels per day,” said Joseph McMonigle, secre- tary general of the International Energy Forum, during a February joint virtual session with OPEC and the International Energy Agency. “Certainly the impact to demand was profound and unprecedented, the biggest demand shock in history, but it is important to note that 90 per cent of demand remained intact, demonstrating oil’s resiliency and necessity to fuel the world economy.” Wood Mackenzie’s scenario goes beyond Inter- national Energy Agency projections Wood Mackenzie’s scenario goes even further than the International Energy Agency (IEA)’s most aggressive decarbonization scenario, which the IEA says the world is not on track to meet. Under the IEA’s Sustainable Development Scenario, which aligns with the goals of the Paris climate agreement, global oil demand declines to 66 million barrels per day in 2040. But as the IEA notes, the SDS scenario is not the one that is playing out. What is playing out is what the IEA calls its Stated Policies Scenario, which is expected to see global oil demand increase to 104 million barrels per day in 2040, driven by population growth and emerging economies in India and Asia. Emerging economies want cheap, reliable energy. According to United Nations forecasts, the world’s population is expected to grow by 2 billion people by 2050, reaching 9.7 billion, driven primarily by growth in India. Indian energy minister Raj Kumar Singh told a
C ollapsing global oil demand? Don’t bet on it. Media outlets proclaimed the impending collapse last week, based on a report by U.K.-based natural resources consultancy Wood Mackenzie that uses flawed assumptions about the pace of decarbonizing energy markets. WhileWoodMackenzie emphasizes that its report “is a scenario, and not our base-case forecast,” and “one interpretation” of how the world could achieve net zero greenhouse gas emissions, it nevertheless paints a misleading picture about the road ahead. COVID has shown the scale of our reliance on oil The COVID-19 pandemic has shown the scale of how integral oil is to power the world, and how unlikely it is that major declines in oil demand are on the way anytime soon.
Wood Mackenzie’s scenario projects that oil demand, which is now almost 100 million barrels per day, will start declining in 2023 and drop to about 35 million barrels per day in 2050. At the height of pandemic lockdowns in April 2020, approximately one-third of the world’s vehicles were off the road and up to 95 per cent of airplanes out of the sky, estimates Jackie Forrest, executive director of the ARC Energy Research Institute. At that height of the immo- bilization, global oil demand dropped by just 20 per cent. “It is shocking, because I think a lot of people didn’t realize that light-duty vehicles are not the only thing that consumes oil. We still continued to want to eat and move goods around, and a lot of shipping still happened,” Forrest said in a February ARC Energy Ideas podcast. “That level of lockdown didn’t reduce oil demand maybe as much as people thought.” In addition to transportation fuel, oil is used to
21
20
JUNE 2021 • SPOTLIGHT ON BUSINESS MAGAZINE
SPOTLIGHT ON BUSINESS MAGAZINE • JUNE 2021
Made with FlippingBook - Online Brochure Maker