IEA: backlashes mean oil and gas demand may not peak so soon

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It is unusual for the International Energy Agency to release forecasts a month before its flagship annual energy report.

Climate policies are in jeopardy in the world’s largest economies, though. The IEA’s assertion that demand for oil, gas and coal will peak before 2030 can be seen as a rallying cry as governments waver in the face of discontent. 

The watchdog’s analysis is based on the policies of governments as they stand. There is often a chasm between intention and reality. Backlashes of the kind already witnessed in countries including the UK and Germany this summer could easily extend the use of fossil fuels.

Last year, the IEA raised the prospect that global gas and coal use would either plateau or fall back by the end of the decade. It had previously expected oil to level off in the middle of the next decade, not before 2030. 

Oil demand is currently at record levels. It reached 103mn barrels a day in June. Strong demand for air travel and increased use of oil for power generation has pushed up consumption this year.

The IEA justifiably believes Chinese demand will slow. Global electric vehicle sales are one reason for the watchdog’s bullishness. These reached 10mn in 2022, accounting for 14 per cent of total sales. They are forecast to grow this year to 14mn. By 2030, EVs are expected to cut the need for 5mn barrels of oil a day. 

The IEA will publish its forecasts in full next month. Executive director Fatih Birol should accompany them with a health warning: governments will have to step up transition efforts to hit the milestones the IEA is proposing.

In Germany, Olaf Scholz’s ruling coalition watered down a ban on oil and gas boilers following an outcry from homeowners worried about the costs of switching to cleaner technologies. In the US, Republicans have been trying to dilute or repeal parts of the Inflation Reduction Act. The UK government has committed to more oil and gas drilling.

Clean energy investors frequently complain that other issues such as planning delays put climate policies in doubt.

The original concept of “peak oil” was that supplies of the stuff would start running out from 1970. In its new guise, “peak oil” describes the point at which demand starts dropping unstoppably. The inaccuracy of the former casts sensible doubt over the latter.

Lex is the FT’s concise daily investment column. Expert writers in four global financial centres provide informed, timely opinions on capital trends and big businesses. Click to explore