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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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The Peak Oil Demand Debate Is Sure To Dominate COP 28

  • The tensions between fossil fuel lobbyists and environmentalists have been tangible at recent Un Climate Change Conferences, and this year’s won’t be any different. 
  • COP 28, which will be held from November 30th through to December 12th, will likely be dominated by talk of peak oil demand.
  • While the IEA believes global oil demand will peak before the end of this decade, OPEC and the oil majors disagree strongly and will look to plead their case in the UAE.
Demand

The past couple of UN Climate Change Conferences have featured a growing number of fossil fuel lobbyists who almost inevitably end up clashing with climate activists and environmentalists over the role and fate of the fossil fuel industry in the global energy transition. For instance, more than 600 delegates affiliated with the fossil fuel industry attended last year’s COP27 climate talks held in Egypt, a large increase compared to 170 who attended the 2021 summit, with predictable results.

The path to averting climate catastrophe isn’t through negotiations flooded with industry lobbyists. Enough is enough in treating those most culpable for the crisis as ‘partners’ or ‘stakeholders’ in the solution,” Hellen Neima, director of the African Climate Campaign at the United States non-profit Corporate Accountability, told Al Jazeera.

The fossil fuels industry and European leaders are still hand-in-hand deciding our energy policy. COP27 is a great opportunity for more gas deals and more business as usual,” Pascoe Sabido, campaigner at the Corporate Europe Observatory, told Al Jazeera.

As you might expect, oil and gas producers have been adamant that fossil fuels will continue to be the world’s primary source of energy for many decades to come.

Africa wants to send a message that we are going to develop all of our energy resources for the benefit of our people,” Namibia’s petroleum commissioner Maggy Shino countered, echoing comments from other African nations.

The upcoming climate conference promises to be just as fiery if recent comments by energy agencies and oil producers are any indication. And peak oil demand is likely to be the bone of contention when COP28 is held in the United Arab Emirates from 30 November until 12 December 2023. 

Back in June, the International Energy Agency(IEA) caused widespread uproar when it predicted that the world’s demand for crude will hit its zenith before the end of the current decade as the transition to renewable energy gathers momentum. According to the IEA, global oil demand will rise by another 6% from 2022-28 to hit 105.7 million barrels per day. The agency expects demand growth for oil to slump to just 400,000 barrels per day in 2028, way below the growth of 2.4 million barrels per day forecast for 2023. Peak oil demand refers to the point in time when global crude demand will be highest, which will be immediately followed by a terminal decline. At this juncture, many oil and gas assets and infrastructure would dramatically decline in value and companies will be forced to write off hundreds of billions in stranded assets as other energy sources take over.

The energy agency has also predicted that global demand for oil used in transportation will start declining in 2026, thanks in large part to the EV revolution as well as policy measures that push for more efficiency. Growth in gasoline demand is expected to reverse at the end of the current year, but the demand for “combustible fossil fuels” is expected to continue growing before peaking in 2028. IEA sees long-term oil demand degrading dramatically and has predicted demand will fall to just 24 million barrels per day by 2050.

OPEC was up in arms over the forecast, accusing the agency of fear-mongering and risking the destabilization of the global economy.

Such narratives only set the global energy system up to fail spectacularly. It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world,” OPEC Secretary-General Haitham al-Ghais said in a Sept. 14 statement.

It’s not the first time the two organizations have sparred over differing energy policies. Back In April, OPEC lashed out at the leading global energy agency and warned it should be “very careful” about undermining industry investments. The admonition followed after IEA Executive Director Fatih Birol said OPEC, led by Saudi Arabia, should be “very careful” with its production policy, saying its short-term and medium-term interests appeared to be contradictory. Birol added that higher crude prices would weaken the global economy and increase inflation with low-income nations likely to be disproportionately affected.

Not surprisingly, Big Oil has taken sides with OPEC:

I don’t know if we’re going to have peak oil in 2030. But it’s very dangerous to say that we have to reduce investment because that is against the transition,” Claudio Descalzi, CEO of Italian multinational energy company Eni, has said, adding that if oil investment drops and fails to meet demand, prices will surge and cripple the economy. Descalzi has acknowledged that burning fossil fuels “is producing lots of CO2,” but added “we cannot shut down everything and rely just on renewables and that is the future, no. It’s not like that. We have infrastructure, we have investment that we have to recover and we have the demand that is still there.”

Big Oil has been accused of dialing back its climate goals as investors have chosen to look the other way with green investments taking a back seat to soaring oil profits. Don’t expect the ongoing tug-of-war between climate activists and their sympathizers like the IEA on one side and oil producers and fossil fuel companies on the other to end any time soon despite calls by the hydrocarbons industry to work together.

By Alex Kimani for Oilprice.com

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  • Mamdouh Salameh on October 09 2023 said:
    OPEC the world’s most influential and informative player in the global oil market has just demolished the IEA’s projection of peak oil demand by 2030 by projecting in its annual World Oil Outlook (WOO) that the global oil demand will rise to 116.0 million barrels a day (mbd) between 2022 and 2045.

    Whilst the IEA expects demand growth for oil to slump to just 400,000 barrels a day (b/d) in 2028, OPEC expects global oil demand to rise from 99.6 mbd in 2022 to 110.2 mbd by 2028, up by 10.6 mbd with non-OECD oil demand expected to increase by 10.1 mbd, reaching 63.7 mbd by 2028.

    By its ambitious projections, OPEC seems to convey the unmistakable message that the notions of energy transition and net-zero emissions are illusions. It also sees oil continuing to drive the global economy well into the future.

    Global demand will continue to grow well into the future albeit at a slightly decelerating rate because of government legislations and to some extent the impact of EVs but it will never stop rising. How else would a rising world population and a growing global economy be fed and supported?

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment




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