Electric vehicles and more efficient use of clean energy will moderate oil demand for transportation by 2040 more than earlier expected, the world, however, may still face a tension in crude supply without enough investment in new production and further improvement in fuel efficiency, the International Energy Agency (IEA) said in its latest energy report World Energy Outlook 2018.
The IEA estimated a oil demand which will grow by 1 million barrels or so per day (bpd) on average each year to 2025, before rising at a slower pace of 250,000 bpd to 2040 when it will peak at 106.3 million bpd.
“In the New Policies Scenario, demand in 2040 has been revised up by more than 1 million bpd compared with last year’s outlook largely because of faster near-term growth and changes to fuel efficiency policies in the United States,” the Paris-based agency said.
The IEA expects around 300 million electric vehicles to run on the road by 2040, remaining unchanged from its forecast a year ago. But its new report expected those electricity-fueled vehicles will trim oil consumption by 3.3 million bpd, compared to a previous estimated reduction of 2.5 million bpd in its last issue of World Energy Outlook.
Improvement in the efficiency of the non-electric cars is even a more important inhibitor to oil demand growth, likely to cut oil demand by 9 million bpd in 2040, the IEA said.
Crude oil use for road transportation is forecast to reach 44.9 million bpd by 2040, up from 41.2 million bpd in 2017, while demand in industrial and petrochemical sectors is expected to reach 23.3 million bpd by 2040, from 17.8 million bpd in 2017.
All additional global oil demand will be contributed by developing economies, especially Asian nations China and India, while demand in developed countries and regions is expected to shrink by more than 400,000 bpd on average every year to 2040, according to the outlook.
On the other hand, the IEA said global demand for natural gas, energy much cleaner than fossil fuel, would increase by 1.6 percent every year to 2040, coming to a level that is 45 percent higher than today. The clean energy is also expected to overtake coal as the world’s second largest energy source second only to oil by 2030.
Concerning the supply side, the United States, the world’s biggest crude producer, will dominate global oil production growth to 2025, with 75 percent of new global supply coming from ports hubs in the US.
From that point onwards, the IEA expects U.S. oil output to drop and the market share of the Organization of the Petroleum Exporting Countries will rise to 45 percent by 2040, from approximately 30 percent at present.