IEA (2019), World Energy Outlook 2019, IEA, Paris https://www.iea.org/reports/world-energy-outlook-2019
Oil demand in 2018 rose steadily, but confounded other expectations. The leading source of consumption growth was not China or India, but rather the United States. Sales of electric vehicles set new records, although they are yet to make a very visible dent in oil consumption. The main increases in oil product demand came from gasoline and diesel but there were also sizeable contributions from ethane, liquefied petroleum gas (LPG) and naphtha as the use of oil as ap petrochemical feedstock continues to grow in importance.
In terms of supply, US tight oil defied talk of infrastructure constraints, and growth to date matches the fastest pace ever seen in the history of oil markets. Economic, political and security issues affected supply from Venezuela, Libya and Iran, while attacks on oil tankers and processing infrastructure in the Middle East have heightened awareness about risks to oil supply from the region, including via some key choke points in international trade. Prices remained relatively subdued despite these events.
So where do we go from here? As ever, the World Energy Outlook sets out a number of pathways. In the Stated Policies Scenario, demand growth is robust to 2025, but growth slows to a crawl thereafter and demand reaches 106 mb/d in 2040. In the Sustainable Development Scenario, the unprecedented scale, scope and speed of changes in the energy landscape paints a very different picture: demand soon peaks and drops to under 67 mb/d in 2040.
Oil use in passenger cars peaks in the late 2020s and during the 2030s demand increases by only 0.1 mb/d on average each year. There is no definitive peak in oil use overall, as there are continued increases in petrochemicals, trucks and the shipping and aviation sectors. The largest increases in production between 2018 and 2040 come from the United States, Iraq and Brazil while the share in oil production from countries in OPEC plus Russia falls to 47% for much of the 2020s, a level not seen since the 1980s.
In the Sustainable Development Scenario, determined policy interventions lead to a peak in global oil demand within the next few years. Demand falls by more than 50% in advanced economies between 2018 and 2040 and by 10% in developing economies.
Reductions in oil use in road transport are particularly significant. By 2040, 50% of cars are electric as are most urban buses; almost 2 million barrels of oil equivalent (mboe) per day biofuels are consumed in the aviation and shipping sectors and almost 20% of the fuel used by trucks worldwide is low-carbon. The only sector to see demand growth is petrochemicals: while the rate of plastics recycling more than doubles (from around 15% today to 35% in 2040), demand for oil as a feedstock nonetheless increases by almost 3 mb/d to 2040.
Some traditional producers and exporters are seeing increasing pressure on their development model as a result of changing oil market dynamics. They face the prospect of a world where markets for their ample oil resources are not guaranteed, and where reduced income from hydrocarbons hampers their ability to maintain upstream spending and constrains the investments necessary to diversify their economies. A shift towards the lower demand and lower price environment of the Sustainable Development Scenario would further underscore the need for economic reform and diversification.