The world is at “the beginning of the end” of the fossil fuel era, according to the International Energy Agency (IEA), which for the first time has forecast that demand for oil, natural gas and coal will all peak before 2030.
New forecasts by the Paris-headquartered agency show that consumption of fossil fuels will start to decline this decade because of the rapid growth of renewable energy and the spread of electric vehicles.
“We are witnessing the beginning of the end of the fossil fuel era, and we have to prepare ourselves for the next era,” IEA executive director Fatih Birol was quoted by the Financial Times.
Birol said that large new fossil fuel projects run the risk of becoming so-called stranded assets, while acknowledging that some investment in oil and gas supplies would be needed to account for declines at existing fields.
“Oil and gas companies may not only be misjudging public opinion… they may well be misjudging the market if they expect further growth of oil and gas demand across this decade.
“New large scale fossil fuel projects carry not only major climate risks but major financial risks,” he said.
In an opinion piece for the FT on Tuesday, Birol said that there is a taboo in the “traditional energy sector” against suggesting that demand for the three fossil fuels — oil, gas and coal — could go into permanent decline, with oil hitting an all-time high.
“But according to new projections from the IEA, this age of seemingly relentless growth is set to come to an end this decade, bringing with it significant implications for the global energy sector and the fight against climate change,” he said.
Less than three months ago, the IEA head had heralded that global oil demand would peak before the end of this decade as the energy crisis accelerates the pace at which countries and industries move away from crude and oil-based fuels.
While total oil demand will continue to grow through 2028, the pace of growth will progressively slow towards the end of the forecast period, after which peak demand is expected to be reached.
“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,” Birol said in mid-June.
“Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition.”
- This article was published first by Upstream