Moody’s says that this year, spending is expected at $352 billion, while medium-term annual investment has to grow to $542 billion to keep up with the demand returning from the pandemic slump, according to the report. “The industry will need to spend significantly more, especially if oil and gas demand keeps climbing beyond pre-pandemic levels through 2025,” Moody’s analysts wrote in the report. The Wall Street Journal wrote that, “Fatih Birol, executive director of the IEA, in a statement accompanying its monthly report, lamented the failure to invest enough to meet future energy needs, saying the situation is “setting the stage for a volatile period ahead.”
The Journal pointed out that the agency for the first time forecasts an eventual decline in oil demand in all three of its scenarios—from the most status quo assumption to the most ambitiously green (net-zero emissions by 2050). Under its most conservative “stated policies scenario,” which is based on climate policies that are already in place and those that are under development, the IEA expects oil demand to peak in the mid-2030s at roughly 104 million barrels a day from almost 100 million today, with a slow decline through 2050.
Yet the Journal says that this s quite a different picture compared with that painted by the Organization of the Petroleum Exporting Countries, which in its World Oil Outlook last month predicted that oil demand will continue to rise until at least 2045. The IEA’s most ambitious scenario—net-zero by 2050—sees oil demand shrinking to a quarter of today’s levels. Differences of opinion are natural, but the IEA’s report last year stopped including a forecast for a “current policies scenario,” which excludes goals that governments have announced but aren’t enforcing. The agency had said back in 2020 that this was because it is “difficult to imagine this ‘business-as-usual approach prevailing in today’s circumstances.”
That is troubling on several levels, but mainly because it rules out a real possibility that governments might not meet those targets. Its latest “stated policies scenario,” for example, includes some distant targets in the U.S. such as 100% carbon-free electricity by 2050 in at least 20 states, as well as California’s goal for all new passenger cars and light trucks sold to be zero-emission vehicles by 2035. The risk is that the IEA’s forecast becomes more of a wish list than a clear-eyed look, according to the Journal.
In the meantime, the fallout from the energy crisis is already rocking the globe and OPEC is in no hurry to help out. OPEC, in their latest report according to Reuters, says that it has trimmed its world oil demand forecast for 2021 while maintaining its 2022 view, its monthly report showed on Wednesday, but it said surging natural gas prices could boost demand for oil products as an end-users switch. The Organization of the Petroleum Exporting Countries (OPEC) now expects oil demand to grow by 5.82 million barrels per day, down from 5.96 million bpd in its previous forecast, saying that the downward revision was mainly driven by data for the first three quarters of the year. It maintained a growth forecast of 4.2 million bpd for next year. OPEC said, however, that natural gas prices at record highs and could provide a potential headwind to oil demand growth as industrial users switch to oil products instead, according to Reuters.
Russia has your back Europe, at the right price that is. Russia’s Putin: Nord Stream 2, Turkstream, other pipelines will provide energy security, cut greenhouse emissions. We need to agree on global mechanisms for ways to balance energy markets. Russia’s Putin: Russia meets its contractual obligations including in Europe and is ready to discuss additional actions. We are working on energy safety in Europe. Not very comforting.
In the meantime, factories are shutting down in Europe! Energy and power shortages are in China and India and the risks could spread to the US. Is the White House ready to meet this coming crisis? It’s just a question.