World facing global energy crisis of unprecedented depth and complexity: IEA

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The world is facing a “global energy crisis of unprecedented depth and complexity” and Russia’s invasion of Ukraine will lead to world’s consumption of fossil fuels peaking by the end of this decade, the International Energy Agency (IEA) said in its World Energy Outlook 2022 report on October 27.

Global oil demand will surpass 2019 levels by 2023, undeterred by high oil prices while demand peaks in the mid‐2030s at 103 million barrels per day (mb/d) and then declines slightly to 2050, the report said.

“There is continued growth in the use of oil for aviation and shipping, as a petrochemical feedstock, and as fuel in heavy trucks, but from the mid‐2030s this is more than offset by declining oil use in other sectors, especially in passenger cars, buildings, and power generation,” IEA said.

The outlook as per the Stated Policies Scenario (STEPS) is based on the assumption that production from Russia in the near term may fall by 2 million barrels a day (mb/d) due to European and US sanctions, and that in the long term it remains well below projections made prior to its invasion of Ukraine. It also pegs the largest increases in production by 2030 to come from the United States, Middle East members of OPEC, Guyana and Brazil. The OPEC share of oil production is seen rising from 35 percent in 2021 to 36 percent in 2030 and 43 percent in 2050. The supply of liquid biofuels is likely to double to 2050, and there may also be a small increase in low‐emissions hydrogen‐based fuels. The report also expects that upstream oil investment rises from current levels to offset losses in supply and meet rising demand and, as markets rebalance, the oil price falls from the very high levels in 2022 to around $82 a barrel in 2030.

IEA said that European sanctions on coal and oil imports and Russian energy giant Gazprom’s decisions to cut gas supply are triggering a profound reshuffling of trade flows around the world.

However, despite growing pressures and uncertainties, global oil demand is set to increase by 1.7 million barrels per day in 2022 as economic and transport activity rebounds, the report stated.

“The oil market today is grappling with huge near‐term and long‐term uncertainties. Fears of recession loom large over the immediate prospects for demand, although China could boost oil use as it emerges from renewed lockdowns,” said IEA.

The report highlighted the emergence of renewables as an alternative to high-priced gas.

“The crisis provides a short‐term boost to demand for oil and coal as consumers scramble for alternatives to high-priced gas. But the lasting gains from the crisis accrue to low‐emissions sources, mainly renewables, but also nuclear in some cases, alongside faster progress with efficiency and electrification, e.g. electric vehicles,” it said.

Natural gas outlook

IEA said that global demand for natural gas held up better than demand for other fossil fuels during the first year of the Covid‐19 pandemic, and then increased by 5 percent in 2021, double its average growth rate over the past decade.

Regarding the demand outlook of natural gas, STEPS states that demand will rise at an average rate of 0.4 percent per year between 2021 and 2030, well below the 2.2 percent average rate of growth seen between 2010 and 2021.

IEA said sanctions imposed on Russian gas by Europe and Russia’s curtailments of natural gas supply to Europe are severing one of the main arteries of global energy trade.

“All fuels are affected, but gas markets are the epicentre as Russia seeks leverage by exposing consumers to higher energy bills and supply shortages. Prices for spot purchases of natural gas have reached levels never seen before, regularly exceeding the equivalent of USD 250 for a barrel of oil,” the report said.​