Over the past five years, demand for oil has fallen sharply due to the global pandemic, wars and other economic problems.
This happened against the background of increasing growth rates of the US economy. shale productioncountries tightly controlling oil emissions and a world moving to alternative energy sources.
All these factors will lead to a “staggering” oil glut by 2030, far exceeding demand, the Paris-based International Energy Agency (IEA) warned in Paris. report on Wednesday.
Oil demand will gradually slow, peaking by 2029 and then stabilizing. The IEA expects oil supply to reach 114 million barrels per day by the end of the decade, about 8 million barrels per day above demand.
“This will result in levels of spare capacity never before seen except at the height of Covid-19 restrictions in 2020,” the IEA said.
“Such a huge oil production buffer could lead to lower oil prices, creating serious problems for US shale producers and the OPEC+ bloc.”
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Although supply will exceed demand in the next couple of years, oil demand will still be slightly higher in 2030 compared to current levels thanks to strong appetite from Asian markets such as India and China.
“In contrast, oil demand in advanced economies is expected to continue to decline for decades,” the report said, adding that the only exception to when demand was similarly low was 1991, when such major events like the Gulf War and the Soviet Union. dissolution occurred. In advanced economies, oil demand will decline by 3 million barrels per day by 2030.
Even countries with relatively high oil consumption will have to contend with the growing presence of electric vehicles and energy efficiency techniques aimed at reducing or offsetting carbon emissions.
Last year the IEA predicted that fossil fuels were at the “beginning of the end” as the energy industry undergoes change. The energy agency warned that demand forecasts in its latest report are affected by economic uncertainty, changes in the pace of electric vehicle adoption and more.
Oil prices have also varied widely, with both Brent and West Texas Intermediate oil indices rising earlier this week on reports of lower oil production. I’d like it later this year. Summer is expected to bring greater demand for oil, although uncertainty such as interest rates still weighs on commodity pricing.
Overall, however, slowing demand will dominate what happens to the oil industry in the future.
The gap in supply and demand will affect the position of the OPEC+ alliance, which includes the world’s largest oil producers and their allies. The group, led by Saudi Arabia and the United Arab Emirates, has been monitoring oil production for years as a way to keep prices in check. Higher oil prices are better for economies, including Russia, that rely on oil exports to fill their coffers.
The reduction in demand will create a “huge safety net” and change OPEC+’s approach to its strategy for further development of oil production, the IEA said. It would also mean that the group’s share of oil production would fall below 50% from this year, paving the way for other OPEC+ members such as Brazil and Norway.
The OPEC Secretary General is not sure that things are going down. IEA forecast was ‘dangerous’, says Haitham Al-Ghais Financial Times Wednesdayand added that if investors stopped pouring money into the oil and gas industry, the resulting “energy chaos” would be “potentially of unprecedented proportions.”
However, it looks like the sun will indeed set on fossil fuels—sooner rather than later.