Why We Shouldn’t Ridicule Oil Demand Reduction

• The IEA recently released a 10-point plan that it estimated could cut global oil demand by 2.7 million barrels per day in just four months.
• While the timeline and some of the suggestions may seem unrealistic, the underlying message is one that should be taken seriously - we do have the power to reduce demand.
• From the impact of Covid lockdowns on oil demand to the growth of electric vehicles in Europe and the impact of low-emissions zones in cities like London, there are plenty of examples of how it can work.

The IEA recently released ‘A 10-Point Plan to Cut Oil Use’, but just how realistic is this plan? With the hope that state governments will incorporate the plan into national policy to curb oil use, it’s important to consider the likelihood of states making these changes and the viability of each of the ten points in practice. 

The plan came in response to the Russian invasion of Ukraine and the subsequent threat to global energy security. Oil and gas prices have been steadily rising to record levels for months, but the Brent Benchmark jumped to $131 a barrel on 8th March, shocking the industry. In addition, the reliance on Russia for oil and gas exports has meant that shortages are being experienced globally, as governments and oil majors explore potential ways of increasing production in other parts of the world to bridge the gap. 

The plan presents 10 suggestions for cutting oil use: reduce speed limits on highways by at least 10 km/h; work from home up to three days a week where possible; car-free Sundays in cities; make the use of public transport cheaper and incentivize micro-mobility, walking, and cycling; alternate private car access to roads in large cities; increase car-sharing and adopt practices to reduce fuel use; promote efficient driving for freight trucks and delivery of goods; using high-speed and night trains instead of planes where possible; avoid business air travel where alternative options exist, and; reinforce the adoption of electric and more efficient vehicles. 

While countries are looking to ramp up their oil production to help with the supply crisis, the IEA is making these suggestions to counter the demand side of the problem. The IEA estimates that “the full implementation of these measures in advanced economies alone can cut oil demand by 2.7 million barrels a day within the next four months, relative to current levels.”

But how viable are these recommendations in practice? Well, some countries have already started to adapt to some of these norms and are well on their way to achieving them, although not all 10 points may work in every country. In the U.K., London has long been home to an emissions zone, introducing an “Ultra Low Emissions Zone,” or ULEZ, in 2019. This means that most traditionally fuelled vehicles entering the zone must pay a fee, in support of reducing pollution in the city.

The Mayor of London, Sadiq Khan, now has plans to expand this zone to include the whole city. London has plans to reach net-zero emissions by 2030 and initiatives like this can strongly help it get there. When established, the ULEZ spurred a decrease of 10,000 cars a day on London’s roads, and the expansion is expected to mean a drop of a further 20,000-40,000 vehicles a day. At present, six in 10 households in London do not own cars, thanks to the wide availability of public transport services as well as the difficulty in parking in the city. 

Another trend that has already taken off is remote working. During the pandemic, workers around the world were forced to work from home because of Covid-related restrictions on movement and gatherings. And countries such as Canada are now exploring the possibility of continuing the remote working trend. A 2015 study found that approximately 36 percent of Canada's workforce were "potential teleworkers". If these workers worked from home five days a week it would mean a reduction of 11 percent of the emissions produced by households for transportation, according to Statistics Canada. While the decrease in emissions during Covid was only temporary, it was unprecedented and does demonstrate what can be done from the demand side.

Meanwhile, the organization C40 - a network of mayors of nearly 100 cities worldwide - has long been pushing the need to increase public transport coverage. At the end of 2021, it announced that public transport usage needed to double in C40 cities over the next decade, at a cost of $208 billion a year, to support the goal of limiting global heating to 1.5°C. and meet international climate change targets. At present, transport contributes around a quarter of the total global carbon emissions.

Europe’s electric vehicle (EV) market has grown exponentially during the pandemic, with a 143 percent increase in sales in 2020 compared to 2019. In the Asia-Pacific region, the EV market is expected to achieve a CAGR of 33.1 percent between 2021 and 2028, reaching $1,927.04 billion by 2028. And other unexpected areas are also welcoming electric passenger vehicles. Some governments across sub-Saharan Africa have already announced electrification targets, aiming to reduce the 10 percent of Africa’s total greenhouse gas (GHG) emissions created by transport. With the region’s car market expected to grow from 25 million vehicles today to an estimated 58 million by 2040, electrification will be vital for reducing carbon emissions. 

Based on current changes already being made across several cities worldwide the IEA targets look relatively realistic. However, very few cities are currently carrying out all these changes at the same time, meaning the reduction of oil use is minimal. Cities would have to make drastic changes across several industries to achieve the type of cuts outlined in the IEA plan. While the estimated 2.7 million bpd reduction in oil demand over the next four months may seem like a pipedream, the effect of these relatively small changes around the world could have a significant effect.

By Felicity Bradstock for Oilprice.com

More Top Reads From Oilprice.com:

• Saudi Arabia Hikes Oil Prices Despite Record Discounts For Russian Crude
  
• Are You Really Being ‘Gouged’ At The Gas Pump?
  
• Russian Crude Continues To Flow Despite Harsh Sanctions