Global crude and condensate demand would peak in four years and slump by 40% over the next three decades if the world moves to a path outlined by the UN’s Intergovernmental Panel on Climate Change, or IPCC, where global warming is limited to 1.5 C or 2 C degrees, according to S&P Global Analytics.
Noting the IPCC’s recent report on global warming, Platts Analytics said a scenario in which warming is limited at 2 C would see crude and condensate demand collapsing to 50 million b/d in 2050, down from around 99 million b/d expected in 2021, after peaking at 104.5 million b/d in 2015.
On Aug. 9, the IPCC warned that limiting global warming to 1.5 C or 2 C could soon be “beyond reach” without “immediate, rapid and large-scale reductions” in emissions.
2040 peak currently seen
But Platts Analytics’ current reference case scenario assumes total liquids supply and demand will peak near 2040 at 111 million b/d and gradually decrease to 108 million b/d by 2050.
“Unless there is substantial government intervention to accelerate fuel switching to low carbon energy carriers, limiting global warming from liquid hydrocarbon emissions will be hard to achieve,” Platt Analytics’ head of North American supply and production, Rene Santos, said in a note.
Even so, environmental groups such as Greenpeace see the IPCC report as a powerful legal weapon in the escalating fight against climate change.
Greenpeace is already preparing to take on UK authorities over a planned upstream development in the latest stage of legal battles threatening Europe’s oil and gas industry.
In May, a Dutch district court, responding to a case brought by the local chapter of Friends of the Earth, ordered Shell to cut its carbon footprint by 45% by 2030, a ruling the Anglo-Dutch major is appealing.
Drilling bans
If the world shifts to a much faster decarbonization trajectory, demand for transportation fuels such as gasoline and diesel will be the hardest hit, according to Platts Analytics, because of an accelerated penetration of alternative vehicles and clean fuels.
With a dependence on lower-carbon, low-cost oil also a priority, OPEC’s market share is expected to increase from 40% under a reference case to around 60% by 2050 with a rapid decline in US shale, Platts Analytics said.
Regionally, South Asia and China would see positive net oil demand growth over the 2015-2050 period, however, because of “underlying fundamental strength.” China’s oil demand would peak at just over 18 million b/d this decade before declining to 14 million b/d by 2050, Platts Analytics said.
Pressure to ban new exploration
Pressure on governments to ban new exploration and upstream projects has grown recently after the International Energy Agency in May said that no new oil and gas resources were needed under a global pathway to achieving net-zero emissions by 2050.
But Platts Analytics said calls for a moratorium on future exploration and upstream developments would be premature, as production decline rates at existing fields would still outpace the expected global contraction in demand under a 2 C scenario.
“A 2D outlook not only requires the development of all currently committed oil projects (OPEC and non-OPEC) but also the development of lower cost uncommitted projects (primarily core-OPEC),” Platts Analytics said. “A complete halt to development of new oil supplies beginning in 2022 would not be sufficient to meet demand under a 2D C outlook.”
Under the landmark IEA net-zero road map published in May, oil supplies would need to shrink more than 8% annually, to 24 million b/d in 2050 from pre-pandemic levels of just above 100 million b/d.
Source: Platts