A slow economic recovery from the pandemic threatens to delay a full rebound in world energy demand to 2025, the International Energy Agency (IEA) has said.
In its central scenario, the discovery of a vaccine and therapeutics could make it possible for the global economy to rebound in 2021 and energy demand to recover by 2023, said the IEA, which advises Western governments on energy policy, in its annual World Energy Outlook.
But under a “delayed recovery scenario”, the timeline will be pushed back two years. In such a case, the IEA envisions “a deeper near-term slump [that] erodes the growth potential of the economy, high unemployment [that] wears away human capital, and bankruptcies and structural economic changes [which] mean that some physical assets become unproductive as well”.
Demand to fall
The IEA also sees global demand for energy falling by 5% in 2020, CO2 emissions related to energy falling by 7% and energy investment by 18%.
Demand for oil is set to drop by 8% and coal use by 7%, while renewables will experience a slight rise.
Overall, the energy watchdog said it was too soon to say whether the pandemic had acted as a spur or a setback to governments and the energy industry as they seek to make the industry more sustainable.
Fatih Birol, the executive director of the IEA, said policymakers were lagging behind. “We are far from reaching our climate goals with the existing policies around the world,” he said.
“The era of global oil demand growth will come to an end within the next ten years, but in the absence ofa large shift in government policies, I don’t see a clear sign of a peak. A global economic rebound would soon bring oil demand back to pre-crisis levels,” Birol told Reuters.
The IEA has, however, warned that uncertainty over future demand and the oil price plunge in 2020 could leave oil producers unsure how to gauge investment decisions, leading to a mismatch in supply and demand, and stoking future market volatility.
The central IEA scenario projects that upstream investment will pick up from the low point in 2020, underpinned by a rise in the oil price to $75 a barrel by 2030.
“However, it is not clear whether this investment will come in time and, if it does come, where it will come from,” the IEA said.