Global oil demand is slated to peak before the end of the decade, according to a new report from the International Energy Agency, a milestone it attributes to investments in clean energy sources, particularly for electric vehicles, and a drop in oil demand growth from China.
In its new 2023 medium-term oil market forecast, published Wednesday, the Paris-based agency predicted that global oil growth will continue to climb by 6% between 2022 and 2028, underpinned by robust demand from the petrochemical and aviation sectors, before ultimately peaking at around 105.7 million barrels per day.
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From there, it said, oil demand will slow significantly, down from 2.4 million barrels per day (bpd) this year, to just 0.4 million barrels per day in 2028.
The expansion of electric vehicles, along with biofuel growth and improvements to fuel economy, have all been key drivers in reducing oil demand, according to the report. The IEA estimates gasoline demand growth will reverse beginning in 2023, and for all transport fuels after 2026.
“The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency, and other technologies advance,” IEA director Fatih Birol said in a statement.
“Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition," he added.
Demand growth from China is also forecast to slow markedly by 2024, petering out from the post-pandemic surge in oil demand that came after the country lifted its COVID-19-era restrictions late last year.
The "pent-up" consumption from Beijing is slated to peak in mid-2023, and begin slowing to an average of just 290,000 bpd from 2024 to 2028.
Supply concerns caused by Russia's war in Ukraine have also hastened the transition to renewable energy sources, the report said, putting the peak demand for oil closer in sight.
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In a separate report last month, the IEA said global clean energy investment is on track to reach $1.7 trillion in 2023 alone, as more investors embrace renewable and clean energy sources, such as EVs, nuclear power, grids, storage, and low-carbon technology.