Energy Transition Forces Rystard to Revise Long-Term Oil Demand Forecast
…Says oil demand to peak in 2028
Norwegian energy intelligence firm, Rystad Energy, has been forced by developments in the Covid-19 pandemic experience, especially the acceleration of the energy transition, to significantly revise its long-term oil demand forecast, Offshore Energy said in a report last weekend.
Rystad predicted that the lasting impact of Covid-19 pandemic and energy transition on oil demand would expedite peak oil demand to 2028 and cut demand levels to 102 million bpd. Before Covid-19, Rystad had called for peak oil demand of just over 106 million bpd in 2030.
In the report, Rystad Energy examines three different scenarios in its long-term oil demand prognosis, and peak demand at 102 million bpd in 2028 is the most likely outcome.
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This forecast scenario is called the “Governmental Targets Scenario” and assumes the share of oil in various sectors develops in line with stated government goals to move towards a cleaner carbon future, notably in the electrification of transport, Offshore Energy said.
According to Rystad, the persistence of the Covid-19 pandemic is likely to cause 2020 oil demand to decline to 89.3 million bpd, compared to 99.6 million bpd in 2019. Demand will then recover to 94.8 million bpd in 2021 still capped by regional lockdowns and slow international aviation recovery as airlines continue to operate far below pre-virus levels.
“In our Governmental Targets Scenario, oil demand then recovers to 98.4 million bpd in 2022, still stuck below pre-virus levels due to structural Covid-19 impacts such as less work commuting and slower aviation recovery.
“It is only in 2023 that demand will recover to pre-Covid-19 levels and jump back to 100.1 million bpd,” said Rystad’s senior oil markets analyst, Artyom Tchen, at Rystad Energy. According to him, the slow recovery will permanently affect global oil demand levels, shaving at least 2.5 million bpd off forecasts made before the coronavirus.
“We have lost at least 2 years of oil demand growth in 2020 and 2021, while before the virus we expected yearly growth of 1 million bpd. The lockdowns will stunt economic recovery in the short-term and in the long-term and the pandemic will also leave behind a legacy of behavioural changes that will also affect oil use,” he said.
Supplementing the effect of Covid-19 on oil demand, the energy transition is accelerating and also weighs on Rystad’s peak oil demand revision. All sectors contribute to the transition, but transport (60 per cent of oil demand) will be the ultimate driver of this shift.
By 2025, the plug-in hybrid and battery electric vehicles (EVs) are expected to achieve 14 per cent market share in new passenger vehicle sales, according to public governmental targets, then further grow to 80% by 2050.
In the short-and-medium-term, Rystad also accounts for an indirect impact of Covid-19 on oil demand prompted by individual behavioural changes.
By Chibisi Ohakah, Abuja