Even if some significant energy companies have announced plans to revitalize their fossil fuel businesses, the world’s oil demand is expected to peak in the coming years.
According to research released by the International Energy Agency on Wednesday, the world’s thirst for oil is still growing, but annual growth is predicted to drop to just 0.4% by 2028.
With a peak in global oil demand expected by the end of this decade, the transition to a clean energy economy is gaining momentum, according to IEA Executive Director Fatih Birol.
The energy crisis of the previous year, according to Birol, has accelerated the transition to cleaner energy sources.
In 2028, the agency projects that the world’s daily oil consumption will be close to 106 million barrels. However, in five years, the growth rate will “shrivel” from the present 2.4 million barrels per day to just 400,000.
According to the agency, tighter fuel economy regulations, a rise in the market for electric vehicles, and structural changes to economies all over the world would undoubtedly have an impact on the world’s appetite for oil.
Shell, which reported a record $40 billion in profit last year, stated on Wednesday that it would maintain current oil production levels through 2030, changing a previous plan to reduce it by 1% to 2% annually.
A representative for Shell told CNN that although its objective to cut oil production by as much as 20% by the end of the decade compared to its 2019 production baseline “had not changed,” it had already achieved the goal early thanks in large part to the sale of some of its oil operations.
The Paris-based organisation claimed in that report that the consequences of Russia’s invasion of Ukraine in 2013 had sped up the world’s transition to cleaner kinds of energy. Additionally, it is projected that through the end of the current decade, investments in low-carbon energy will rise to $2 trillion annually, an increase of 50% from the level in October.
Pushing Investment
Nevertheless, some of the biggest energy companies in the world intend to increase their investment in oil and gas production. They are feeling good about a year of record-high commodity prices and eye-popping profits.
The IEA predicted that in 2023, spending on oil and gas exploration and production will reach $528 billion, the highest level since 2015 and an 11% rise over the previous year’s total.
Additionally, the business disclosed on Wednesday that it would increase shareholder dividends by 15% and spend at least $5 billion repurchasing its own stock in the second half of the year. The company’s shares increased 1.6% on Wednesday.
Early this year, BP (BP), which also posted a record profit of $28 billion in 2022, said it would scale back its production-cutting goals.
BP had intended to reduce oil production by 40% against this benchmark, but it now expects to reduce output by 25% from 2019 levels by 2030.
By 2050, Shell and BP both still have plans to operate emissions-free.
Oil corporations, according to IEA’s Birol, should “pay careful attention” to the most recent projections.
He noted that in order to secure a smooth transition to a new energy source, oil companies have to “calibrate their investment decisions.”
