Released June 15, 2023 | SUGAR LND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--In a new report, the International Energy Agency (IEA) (Paris, France) sees global oil demand growth slowing markedly over the next few years, driven by oil prices, actions by governments around the world and consumer behavioral changes.
Oil 2023, released June 14, predicted global oil demand rising by 6 million barrels per day (BBL/d) between 2022 and 2028, reaching 105.7 million BBL/d in 2028. Reduced demand for road transportation fuels would be partially offset by strong demand growth from petrochemical and aviation sectors, the agency said.
Overall, annual growth in oil demand would fall from about 2.4 million BBL/d in 2022 to about 400,000 BBL/d in 2028, forecast Oil 2023. Notably, demand growth from road transportation steadily declines and turns negative in 2026, though demand from other types of transport, mainly seaborne shipping and aviation, rise. Petrochemical feedstock demand growth rises sharply from 2022 to 2023, and remains at about 400,000 BBL/d until 2028 in the agency's projection.
Click on the image at right to see the IEA's prediction about changing demand growth trends for different sectors over the 2023-2028 period.
"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 as electric vehicles, energy efficiency and other technologies advance," IEA Executive Director Fatih Birol said in a statement accompanying the 127-page report. "Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition."
Since oil demand largely is a function of oil prices, the IEA report includes three price scenarios: base, high price and low price. The base case assumes prices for Brent crude oil will remain at $76 per barrel through the 2023-2028 period. The high price had Brent rising steadily to about $87 per barrel in 2028 while the low price saw Brent falling steadily to about $60 per barrel in 2028. In a high price environment, demand for oil would fall by about 430,000 BBL/d by 2028 but demand would rise by about 670,000 BBL/d in that year if oil prices were low, IEA said.
Click on the image at right to see the IEA's price projection for Brent crude oil through 2028, and how the "high" and "low" price cases could affect demand.
The government actions referenced by the report include a significant increase in interest rates to slow inflation. Higher interest rates reduce demand for goods and services by making them more expensive. Higher interest rates limit economic growth, thus curbing demand for oil and gas.
The other government actions referred to by the report are a tightening of efficiency standards, which further limit future demand for oil, gas and electricity.
The consumer behavioral changes discussed in the report refer in part to increased popularity of electric vehicles (EVs) and workers' strong preference for working in places outside the office. Companies and their employees currently are in a test of wills around remote work, with employers wanting employees back in the office but employees resisting.
Regarding EV sales, the report predicted annual sales would skyrocket, to slightly over 25 million vehicles sold around the world in 2027, up from just over 10 million EVs sold in 2022. The IEA expected China to continue to account for the lion's share of EV unit sales to 2028.
Click on the image at right to see the IEA's prediction about global EV sales through 2028.
The Paris-based energy agency estimated that global telework shaved about 1 million BBL/d off oil demand in 2020, at the height of the COVID-19 pandemic. However, those reductions fell in 2021 and 2022, and another slight decline is seen for 2023. The IEA expects telework-related oil use reductions settling at slightly over 400,000 BBL/d over the 2024-2028 period.
Click on the image at right to see the IEA's estimation of how increased telework affects global oil demand.
Offsetting reduced demand for oil in the transport sector will be a steady rise in demand from the petrochemical sector, the agency forecast.
By region, Asia is expected to account for about 90% of global demand growth for oil and refined products, roughly 5.5 million BBL/d, through 2028. Demand in Africa, Eurasia, the Middle East and Latin America also will rise, but European and North American demand will plateau in 2023-2024, then decline afterwards. North American oil demand will peak at about 24.7 million BBL/d this year while European demand will peak at around 15 million BBL/d next year. Neither region will return to their pre-pandemic peak demand of 2019, the report forecast.
Click on the image at right to see the IEA's prediction of global oil demand growth, by region, for the 2022-2028 period.
The IEA report also includes some predictions about future global oil supply growth, which the agency expects will keep pace with a projected slowdown in demand growth through 2028. Global oil production is expected to grow by about 5.9 million BBL/d by 2028, to about 111 million BBL/d, the agency said. U.S. supply growth rose by over 1 million BBL/d in 2022, and is expected to do so again this year, but production growth thereafter is projected to fall off sharply, a function of producers' capital discipline, maturing oil fields and slowing consumer demand growth.
Click on the image at right to see IEA's projection of global oil supply and demand growth for the 2022-2028 period.
As for capital investment in exploration and production, the report predicted that global upstream capital expenditures is set to rise by about 11%, or approximately $54 billion, in 2023 to $528 billion, the highest since 2015. By contrast, global upstream spending was about $401 billion in 2021 and $474 billion in 2022.
The report added: "Industry investment in giant projects has slowed sharply amid the shift towards a lower carbon future. Our analysis shows companies are targeting smaller, short-cycle projects and select oil field developments in the Americas and Middle East. These expansion plans tend to be lower cost and low-carbon projects with shorter payback periods as companies aim to avert the potential for stranded assets amid increased environmental, social and governance (ESG) pressures and expanding climate initiatives."
Despite an expected slowdown in U.S. production growth, the U.S. is still expected to account for nearly half of the world's supply growth to 2028.
Click on the image at right to see the IEA's projection of global supply growth from various countries over the 2022-2028 period.
Finally, the Oil 2023 report projected that worldwide refining capacity will increase by about 6 million BBL/d by 2028, but that gain will be partially offset by about 1.4 million BBL/d in capacity reductions, resulting in a net gain of approximately 4.6 million BBL/d of capacity by 2028.
Click on the image at right to see IEA's projection of how oil refining capacity will change in which regions over the 2022-2028 period.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
Oil 2023, released June 14, predicted global oil demand rising by 6 million barrels per day (BBL/d) between 2022 and 2028, reaching 105.7 million BBL/d in 2028. Reduced demand for road transportation fuels would be partially offset by strong demand growth from petrochemical and aviation sectors, the agency said.
Overall, annual growth in oil demand would fall from about 2.4 million BBL/d in 2022 to about 400,000 BBL/d in 2028, forecast Oil 2023. Notably, demand growth from road transportation steadily declines and turns negative in 2026, though demand from other types of transport, mainly seaborne shipping and aviation, rise. Petrochemical feedstock demand growth rises sharply from 2022 to 2023, and remains at about 400,000 BBL/d until 2028 in the agency's projection.
"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 as electric vehicles, energy efficiency and other technologies advance," IEA Executive Director Fatih Birol said in a statement accompanying the 127-page report. "Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition."
Since oil demand largely is a function of oil prices, the IEA report includes three price scenarios: base, high price and low price. The base case assumes prices for Brent crude oil will remain at $76 per barrel through the 2023-2028 period. The high price had Brent rising steadily to about $87 per barrel in 2028 while the low price saw Brent falling steadily to about $60 per barrel in 2028. In a high price environment, demand for oil would fall by about 430,000 BBL/d by 2028 but demand would rise by about 670,000 BBL/d in that year if oil prices were low, IEA said.
The government actions referenced by the report include a significant increase in interest rates to slow inflation. Higher interest rates reduce demand for goods and services by making them more expensive. Higher interest rates limit economic growth, thus curbing demand for oil and gas.
The other government actions referred to by the report are a tightening of efficiency standards, which further limit future demand for oil, gas and electricity.
The consumer behavioral changes discussed in the report refer in part to increased popularity of electric vehicles (EVs) and workers' strong preference for working in places outside the office. Companies and their employees currently are in a test of wills around remote work, with employers wanting employees back in the office but employees resisting.
Regarding EV sales, the report predicted annual sales would skyrocket, to slightly over 25 million vehicles sold around the world in 2027, up from just over 10 million EVs sold in 2022. The IEA expected China to continue to account for the lion's share of EV unit sales to 2028.
The Paris-based energy agency estimated that global telework shaved about 1 million BBL/d off oil demand in 2020, at the height of the COVID-19 pandemic. However, those reductions fell in 2021 and 2022, and another slight decline is seen for 2023. The IEA expects telework-related oil use reductions settling at slightly over 400,000 BBL/d over the 2024-2028 period.
Offsetting reduced demand for oil in the transport sector will be a steady rise in demand from the petrochemical sector, the agency forecast.
By region, Asia is expected to account for about 90% of global demand growth for oil and refined products, roughly 5.5 million BBL/d, through 2028. Demand in Africa, Eurasia, the Middle East and Latin America also will rise, but European and North American demand will plateau in 2023-2024, then decline afterwards. North American oil demand will peak at about 24.7 million BBL/d this year while European demand will peak at around 15 million BBL/d next year. Neither region will return to their pre-pandemic peak demand of 2019, the report forecast.
The IEA report also includes some predictions about future global oil supply growth, which the agency expects will keep pace with a projected slowdown in demand growth through 2028. Global oil production is expected to grow by about 5.9 million BBL/d by 2028, to about 111 million BBL/d, the agency said. U.S. supply growth rose by over 1 million BBL/d in 2022, and is expected to do so again this year, but production growth thereafter is projected to fall off sharply, a function of producers' capital discipline, maturing oil fields and slowing consumer demand growth.
As for capital investment in exploration and production, the report predicted that global upstream capital expenditures is set to rise by about 11%, or approximately $54 billion, in 2023 to $528 billion, the highest since 2015. By contrast, global upstream spending was about $401 billion in 2021 and $474 billion in 2022.
The report added: "Industry investment in giant projects has slowed sharply amid the shift towards a lower carbon future. Our analysis shows companies are targeting smaller, short-cycle projects and select oil field developments in the Americas and Middle East. These expansion plans tend to be lower cost and low-carbon projects with shorter payback periods as companies aim to avert the potential for stranded assets amid increased environmental, social and governance (ESG) pressures and expanding climate initiatives."
Despite an expected slowdown in U.S. production growth, the U.S. is still expected to account for nearly half of the world's supply growth to 2028.
Finally, the Oil 2023 report projected that worldwide refining capacity will increase by about 6 million BBL/d by 2028, but that gain will be partially offset by about 1.4 million BBL/d in capacity reductions, resulting in a net gain of approximately 4.6 million BBL/d of capacity by 2028.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
