The following blog is distilled from an interview on the CBC’s “The Eyeopener,” hosted by Loren McGinnis who interviewed Enverus Intelligence® Research’s very own Al Salazar. Click here to listen to the full radio segment.
In its recent World Energy Outlook report, the International Energy Agency (IEA) made a bold prediction that renewable energy would account for almost half of global power generation by 2030. To hit this target, global fossil fuel use in the power generation sector, must decrease by 10% in five years. Furthermore, the IEA stated for the world to be on pace to hit its net zero target by 2050, global oil demand would have to be at around 85 million barrels per day in 2030. Other fossil fuel consumption has comparable required declines.
Currently, the world is consuming roughly 103 million barrels per day and would need to decline three to four million barrels per day, per year, till the end of the decade to hit this 85 million barrel per day level. This is a tall order considering oil demand growth outside of COVID-19, recessions and geopolitical supply outages has shown sustained gains since the late 60s. For added context, 85 million barrels per day is six million barrels less than the demand levels experienced during COVID-19 (global oil demand sunk to ~91 MMbbl/d during 2020), so is IEA’s prediction realistic or just wishful thinking?
In this blog post, using the insights from the Enverus Intelligence® Research’s very own Al Salazar; we’ll explore the current state of net zero, decarbonization successes and the likelihood that our planet can switch over to 50% renewable energy by 2030 as IEA predicts, or reduce oil consumption at a pace that will help achieve net zero by 2050.
Hitting and Missing Decarbonization Targets
While IEA’s report does not comment on the likelihood of meeting net zero targets by 2050, its prediction of 50% renewable energy by 2030 certainly assumes the planet will be on firmer footing than it actually is. Nonetheless, progress has been made with Europe hitting its decarbonization targets and electric vehicle growth in China hitting record highs.
Meanwhile, North American EV adoption has hit a speed bump as manufacturers pull back from EV production and consumers cringe at the high sticker price. As the ambition grows, the momentum has also slowed in renewable energy projects largely due to permitting and regulatory bottlenecks for implementing and distributing Inflation Reduction Act tax credits.
IEA’s 2030 prediction also assumes that 50% of all cars will be new energy vehicles (plug-in hybrid or full battery EV) by 2030, a number that seems challenged without cheaper EVs. Next, global vehicle sales remain depressed in some regions, suggesting percentage of sales metrics may be attained, but at a smaller overall sales number, should sluggishness in global auto markets continue.
Though China is flooding the market with less expensive EVs, export markets are being blocked by tariffs in Europe and potentially the U.S.; and while Chinese EV and renewable energy adoption may be strong, high growth areas of Southeast Asia will likely require all energy sources to fuel the future, including fossil fuels.
Would you like to receive more key energy insights on navigating the volatile energy markets? Learn more about how Enverus Intelligence® Research can be your extended team of trusted energy advisors.
Demand Outlook for Oil, Gas and Coal
Since 1965, demand for natural gas is a steady slope upward and is expected to continue, despite renewables displacing gas fired generation. Other demand sectors (ex. heating/agriculture) don’t have the same substitution pressures and will continue to grow. As for oil, demand outside of recessions/covid and geopolitical shocks consumption has largely sloped upwards historically as well. Oil demand will continue to grow, albeit with major changes in product and regional composition. Coal is a safer bet to decrease given government mandates and a generally more negative sentiment in the energy space.
While the Chinese economy may have slowed and softened the demand outlook, Southeast Asian countries in the Ring of Fire are expected to rush to liquified natural gas as the go-to energy source to power their rapidly growing economies. This includes Vietnam, Thailand, the Philippines, Malaysia and Indonesia, many of which are also anticipated to take some of the Chinese manufacturing market share. By all accounts LNG and especially North American exports appear to have a long-term bright future.
Identify and act on global LNG arbitrage opportunities with Enverus Trading and Risk – leverage real-time energy commodity pricing data to glean key insights and transform chaos into trading opportunities!
About Enverus Intelligence®| Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations, and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies, and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. See additional disclosures here.
