An impending shortfall in oil supply, a 25 percent increase in energy demand by 2040, the dramatic rise of electricity and a global collective failure to tackle greenhouse gas emissions are some of the key points in the recently-published World Energy Outlook 2018 from the International Energy Agency (IEA).
The report identifies three key pillars for the international provision of energy - affordability, reliability and sustainability – and suggests cracks are showing in this structure.
While oil prices climbed above $80 per barrel in 2018 for the first time in four years, hard earned reforms to fossil fuel consumption subsidies are under threat in some countries. Risks to the supply of oil and gas remain while one in eight of the world’s population still have no access to electricity.
After three flat years, and despite regular warnings of the consequences from a range of agencies and organisations, global energy-related carbon dioxide (CO2), emissions rose by 1.6 percent in 2017 and early data suggests this trend has continued this year.
All the growth in energy demand is forecasted to come from developing economies, led by India. In 2000 Europe and North America accounted for more than 40 percent of global energy demand and economies in Asia for around 20 percent. According to the IEA, by 2040 this situation will be completely reversed.
Focusing on what it describes as a ‘new policies scenario’, which factors in the impact of announced policies and targets, as well as assuming a 1.7billion population growth, the report says energy demand is set to grow by more than 25 percent to 2040, requiring more than $2trillion a year of investment in new energy supply.
The North American shale revolution will continue to shake up oil and gas supply, enabling the U.S.A. to pull away from the rest of the world as the largest producer. However, lack of investment in new oil projects globally could lead to a shortfall in supply and an escalation in prices. The IEA suggests the average level of new conventional (non shale) crude oil project
approvals over the last three years will deliver only half the amount necessary to balance the market in 2025. Shale, or tight oil, won’t be able to fill this gap on its own.
In contrast, fears of an impending tightening in the global liquefied natural gas (LNG) market by the mid 2020s may be allayed by major new project announcements in Qatar and Canada.
According to the IEA, oil use for cars will peak in the mid 2020s and electric vehicles will make up half the entire car fleet by 2040, so where will the increased demand for oil come from? The answer is from other forms of transport (trucks, planes, ships) but mainly from
petrochemicals, including plastics.
The report states even if global recycling rates for plastics were to double, this would cut only around 1.5million barrels of oil a day from the projected increase for petrochemicals of more than 5million barrels of oil a day. The overall growth in oil demand to 106million barrels a day will come entirely from developing economies as incomes and living standards increase. And despite reducing emissions, even electric and better performing cars of the future are expected to contain more plastics.
Far from of reducing CO2 emissions, the IEA predicts a slow upward trend to 2040, completely out of step with what scientific knowledge says will be required to tackle climate change.
Considering the new policies scenario, the report states: “The projected emissions trend represents a major collective failure to tackle the environmental consequences of energy use. Lower emissions of the main air pollutants in this scenario are not enough to halt an increase in the number of premature deaths from poor air quality.”
The electricity markets are undergoing a unique transformation with higher demand brought by the digital economy, electric vehicles and technological changes.
However, while in 2017 the number of people without access to electricity dipped below 1 billion for the first time, more than 700million people, mainly in the rural settlements of sub-Saharan Africa, are projected to still be without electricity in 2040.
Of all the predictions and forecasts in the IEA’s report, this last one arguably requires the energy industry’s most urgent attention.