Barrel of Laughs
The oil industry may have a reckoning on the horizon. According to a new report from the International Energy Agency, the world is headed towards a ludicrous surplus in oil supply that could see prices tumble and the industry’s position falter — a forecast in no small part attributed to the growth in renewables, especially solar.
This impending oil “glut,” as the energy watchdog predicts, will come after a peak in global oil demand in 2029, plateauing at 105.6 million barrels per day.
With a continued drop in demand in the following year, the supply will overshoot that figure by about 8 million barrels per day — a disparity that hasn’t been seen since the lockdowns at the height of the COVID-19 pandemic.
“Such a massive oil production buffer could usher in a lower oil price environment, posing tough challenges for producers in the U.S. shale patch and the OPEC+ bloc,” the IEA said in its annual report, referring to the coalition of the world’s leading oil producers that includes Saudi Arabia and the United Arab Emirates.
Striking it Poor
In advanced economies, where oil demand has already been declining for decades, the IEA estimates that it’s set to further fall from 45.7 million barrels per day in 2023 to 42.7 million by 2030.
On the opposite side of that equation, producers such as the US and OPEC+ members have only ramped up investments in oil, and their contributions are expected to drive production upwards with China and India, both hugely expanding economies with massive populations and a growing number of drivers, as the biggest customers.
But China’s economic growth, which has accounted for around 60 percent of the uptick in global oil demand for the past decade, the IEA said, is expected to slow in the coming years, and with it its appetite for oil.
Furthermore, the IEA sounds very optimistic about the impact renewables will have. A greater adoption of electric vehicles — of which China is the world’s leading manufacturer — plus a bump in solar energy will be the biggest difference makers, more so than other forms of clean energy technology.
And we may already be seeing signs of that right now, with solar proving so efficient at times that prices are dipping into the negative in certain markets. On the other hand, EV adoption seems less like a sure thing right now than it did a few years ago as sales falter. And so the future remains a slick thing to grasp — though hopefully not oil slick.
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Source Agencies
