Oil demand could peak this decade, IEA says

Global oil demand is projected to peak in the next few years even as some major energy companies announce plans to reinvigorate their fossil fuel businesses.

The world’s appetite for oil is still rising, the International Energy Agency said in a report Wednesday, but annual growth is expected to slow to just 0.4% by 2028.

“The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade,” said IEA Executive Director Fatih Birol.

Birol added that last year’s energy crisis had hastened the shift to cleaner sources of energy.

The agency expects global oil demand to reach nearly 106 million barrels per day in 2028. But the rate of growth will “shrivel” from the current 2.4 million barrels per day to just 400,000 in five years’ time.

The global thirst for oil is likely to be affected by stricter fuel efficiency standards, growth in the electric vehicle market and structural changes to economies around the world, according to the agency.

The IEA’s latest forecasts update its prediction in October that demand for oil would plateau by the mid-2030s.

An offshore drilling platform stands in shallow waters at the Manifa offshore oilfield, operated by Saudi Aramco, in Manifa, Saudi Arabia, on Wednesday, Oct. 3, 2018. Saudi Arabia?is seeking to transform its crude-dependent economy by developing new industries, and is pushing into petrochemicals as a way to earn more from its energy deposits. Photographer: Simon Dawson/Bloomberg via Getty Images

Oil prices jump after Saudi Arabia vows to cut production again

In that report, the Paris-based agency said the fallout from Russia’s invasion of Ukraine last year had hastened the global transition to cleaner forms of energy. It also expected investments in low-carbon energy worldwide to increase to $2 trillion a year until the end of the current decade — up 50% from October’s level.

Investment push

Still, some of the world’s biggest energy producers — riding high after a year of soaring prices for their products and eye-watering profits — are planning to invest more in oil and gas output.

The IEA said it expected investment in oil and gas exploration and production to hit $528 billion in 2023, its highest level since 2015 and an 11% increase on last year’s figure.

Shell, which posted a record $40 billion in profit last year, announced Wednesday that it planned to keep its oil output steady until 2030, revising an earlier plan to cut production by between 1% and 2% a year over that period.

A Shell spokesperson told CNN that its goal to reduce oil production by as much as 20% — against its 2019 production baseline — by the end of the decade “had not changed,” but that it had met the target early, thanks, in large part, to the sale of parts of its oil business.

The company also announced Wednesday that it would hike its shareholder dividend by 15% and spend at least $5 billion buying back its own shares over the second half of the year. Its shares rose 1.6% on Wednesday afternoon.

BP (BP), which also reported a record profit of $28 billion in 2022, announced earlier this year that it would scale back its targets to cut production.

BP now plans to slash oil output by 25% by 2030 from 2019 levels, whereas it previously aimed to cut output by 40% against this benchmark.

Both Shell and BP still plan to become net-zero emissions businesses by 2050.

The IEA’s Birol said oil companies needed to “pay careful attention” to the agency’s latest forecasts.

“Oil producers need to… calibrate their investment decisions to ensure an orderly [energy] transition,” he said.