The International Energy Agency (IEA) published their closely-watched, annual World Energy Outlook (WEO) last week. At over 810 pages, the WEO publication is an encyclopedia on the state of energy today.
The IEA’s three future scenarios illustrate widely diverging paths for the future of oil demand:
Current Policies Scenario (CPS). This outlook assumes that the policies in place today are implemented, and no more steps are taken. In this case oil demand climbs from 97 MMB/d in 2018 to over 120 MMB/d by 2040. This is a stern reminder that current policies are no where near enough to stop the persistent growth of oil demand.
Stated Policies (STEPS). This case assumes that most governments meet their Nationally Determined Contributions (NDCs) made in support of the 2015 Paris Agreement. These contributions are not enough to hold the global temperature rise to well below 2 ºC. In this case, oil demand flat-lines in 2030 at about 105 MMB/d, creating a plateau instead of a peak.
Sustainable Development Scenario (SDS). This scenario demonstrates the decline of oil consumption if the aspirations of the Paris Agreement are delivered on. Global warming is limited to less than 1.8 ºC and emissions get on track for reaching net zero by 2070. In this scenario, oil demand peaks in the next few years and then declines to 67 MMB/d by 2040. For the first time, the IEA has extended this scenario to 2050 and predicts that oil demand would drop to 50 MMB/d if aggressive policies are implemented.
Despite the fact that the current trends are well off-track for delivering a low carbon future, the IEA has faced disapproval of the SDS outlook. Critics view it as not ambitious enough, demanding that a 1.5 ºC of warming, net zero 2050 case becomes a central scenario.
Back to the principal question, when is peak oil demand? Based on the current trend, peak demand is not expected to occur before 2040. The Stated Policies Scenario illustrates a plateau by 2030, however this assumes rules to enforce the Paris Agreement NDCs are quickly enacted. Actions that, for the most part, have not been taken despite the deal approaching its fourth anniversary. Importantly, the IEA’s scenarios also illustrate the massive gap between the current trends and the path needed for achieving a low carbon future.