What’s needed is a fact-based discussion about the speed of the energy transition, and whether net-zero by 2050 targets can be reached, the Global Business Forum heard
BANFF — Canada’s Natural Resources Minister Jonathan Wilkinson turned some heads this week by declaring that global demand for oil will plateau soon.
As in, real soon.
“Oil and gas will peak this decade. In fact, oil is probably peaking this year,” he told reporters in Ottawa.
While that prognostication might fit the narrative that oil demand is faltering quickly and about to peak within months — BP also said recently the plateau is coming around 2025 — that isn’t what the data shows.
That would push global consumption to a record level of almost 103 million bpd.
And it forecasts oil consumption next year will rise by almost one million bpd, although the Paris-based agency has also previously projected total demand for both oil and gas will peak later this decade.
Meanwhile, a new long-term outlook released this year by OPEC — not a neutral observer, obviously — is projecting consumption will rise to about 120 million bpd by 2050.
In other words, the numbers are all over the map.
What’s needed is a fact-based discussion about the speed of the energy transition, and whether net-zero by 2050 targets can be reached, the Global Business Forum heard Friday.
“It took a global lockdown of transportation and immobility (during the pandemic), and all it did was curtail about six per cent of oil demand,” author and energy economist Peter Tertzakian, founder of the ARC Energy Institute, said during the forum’s second day.
“This commodity, love it or hate it, is incredibly difficult to displace … Just look at the numbers, oil consumption is going up. So when people say oil is going down, it’s actually the rate of growth is diminishing.”
During a Friday address, Tertzakian and ARC Energy Research Institute executive director Jackie Forrest talked about the difficulty of rapidly shifting off oil and gas, and how the targets of cutting emissions to meet the 2015 Paris climate accord — and then reaching net-zero by 2050 — are proving elusive.
It also warned emissions must still drop by 28 per cent to reach the Paris Agreement’s goal of limiting global warming to 2 C. An even bigger lift, a 42 per cent drop, would be required to reach a 1.5 C target.
“We need to get more realistic about what the future is … I think there’s going to be more news about companies going back on their 2030 goals, saying they can’t achieve them,” Forrest said.
“This net zero by 2050 narrative has got to change to something else — and it’s going to, because it’s not achievable,” added Terzakian.
This is not something to gloat about, he noted, but it should lead policymakers and industry leaders to develop a backup strategy.
This is a relevant discussion as overall energy demand is increasing, concerns about climate are mounting, and there needs to be more investment in clean energy technology and electrification.
“Plan A is not working … If this was a corporation, the leader of Plan A would be fired and we’d be having a discussion about a new strategy. We’re not yet having the new strategy discussion,” Tertzakian said in an interview.
“I’m hopeful that on the positive side, what will come out of this before the end of the decade is some sort of Plan B and a new type of narrative. But it’s going to depend upon a whole bunch of things going well, in terms of global collaboration, depolarization.”
Forrest expects oil consumption will likely plateau and slowly decline in the 2030s, mainly due to the growth of electric vehicles.
Meanwhile, demand for natural gas is also increasing.
Energy giant Shell has forecast that global gas use will peak after 2040, as LNG demand is expected to continue climbing in the coming years.
“If you look at the numbers today, again we still see growth in both oil and natural gas,” Shell Canada president Susannah Pierce said on the sidelines of the forum.
“A lot of what the future is going to be (will be affected by) the pace of transition in consuming countries … and so you have to prepare for multiple different scenarios. You also have to have to prepare for supply shocks.”
Oil market watcher Rory Johnston, founder of the Commodity Context newsletter, said governments should leave it to others and not make pronouncements on oil demand reaching its highest point — or consumption surging — for the commodity.
He questions the signal it sends when the energy minister of the world’s fourth-largest oil producer says demand will probably peak this year.
“If that’s what the government believes, that tells me how they are thinking about economic opportunities, the risk of trade-offs and where to put policy,” he said in an interview from Toronto.
“My general issue of politicians weighing in on issues like this is they should seek out expertise. They should not be taking a firm, almost advocacy-esque position themselves.”
Chris Varcoe is a Calgary Herald columnist.