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A new report from the International Energy Agency (IEA) predicts that gasoline demand will never return to pre-pandemic levels. The IEA tracks EV industry growth as an indicator of future oil demand, and their five-year forecast says that an accelerating shift toward EVs and increasing fuel efficiency among gas-powered vehicles will outweigh demand growth from developing nations. The forecast points to many automakers who have pivoted to EVs in recent months, including Ford, Volvo, GM, and Jaguar. Experts predict that 60 million electric vehicles will grace the world’s roads by 2026, up from just 7.2 million in 2019. This growth, the agency said in the report, could mean that “there may be no return to ‘normal’ for the oil market in the post-COVID era.”
Why This Matters: While there won’t necessarily be a lack of supply, the report states, the lack of demand may lead to a winding down of oil operations entirely. Without demand, fossil fuel and adjacent industries will have to switch to new business models, including investing in clean, green energy. Already, many oil giants have made pledges to decrease their carbon footprints and invest in renewables. They’ll have help along the way from some local and state governments, which are eager to work with companies to prepare communities for closing power plants, mines, and oil drilling, and ease workers into clean energy jobs. “Whatever the transition pathway, the oil and gas industry has an important role to play, and no energy company will be unaffected,” the report states.
The report says that stronger public policy will be key to reducing oil demand and securing a clean-energy future. The social and economic adjustments that were swiftly implemented by people across the globe to combat COVID-19 will be helpful. In addition to fuel efficiency improvements, EV development and deployment, and policies to curb oil use, the report states that increased teleworking and reduced business travel could be key steps in meeting the goals of the Paris agreement. Altogether, these methods could reduce oil use by as much as 5.6 million barrels per day by 2026, which would prevent oil demand from ever returning to pre-pandemic levels.
Despite a global drop in demand, fossil fuel operations in the Middle East and parts of Asia are expected to grow the most in coming years. The report states, “If Iran remains under sanctions, keeping the world oil market in balance may require Saudi Arabia, Iraq, the UAE, and Kuwait…to pump at or near record highs.” Asian crude oil imports are predicted to reach up to 27 million barrels per day by 2026. Asia’s economic oil dependence is also expected to rise to 82% in the next five years, which will make decarbonization particularly complicated in the region. However, China, the world’s largest polluter, has made strong commitments in its latest NDC which was proposed in December 2020.
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