Rystad Energy: Oil demand is expected to increase in the medium term

The study assesses the five-year trajectory of oil demand, the technological readiness of each sector for the transition, and the policy framework supporting the transition. Rystad Energy's analysis explores the impact of key breakthroughs such as the rapid electrification of buses, trains and cars, and the challenges faced by remaining sectors that lack fully developed or competitive alternatives. is revealed.

“With oil demand likely to continue on an upward trajectory in the medium term, a rapid transition away from oil is unlikely unless we witness breakthroughs in low-carbon energy carriers that can technically and economically replace oil. Unlikely. Our latest medium-term forecast brings some reality to the oil transition story, as well as further exploring clean technology and renewable energy wherever it makes economic sense. It should bring a new sense of urgency to invest and achieve breakthroughs,” said Claudio Galimberti, Director of Global Market Analysis at Rystad Energy.

Transportation facilities

Approximately a quarter of global oil demand comes from passenger road transport, so the introduction of electric vehicles (EVs), comprising both battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs), is key. It's not surprising that. Factors for estimating the impact on oil demand. EVs have been increasing since 2018 and will account for 16% of global sales in 2022. However, there is a lack of mass-market EVs outside of China, poor charging infrastructure, low consumer acceptance in some regions, concerns about charging, and the end of subsidies in some countries. Masu.

Despite these challenges, Rystad Energy still predicts that the electrification of passenger road transport will regain momentum in the second half of this decade and beyond. Automakers have pledged to produce tens of millions of EVs over the next few years, which will bring economies of scale. Still, it's important to note that some of these plans have been scaled back recently due to poor return on investment. In the end, there is one big problem to solve. That's the worry about charging. Areas where car owners do not own private parking spaces. This phenomenon is particularly acute in many non-OECD countries and also in a significant number of her OECD countries.

Beyond passenger road transport, the transition to alternative energy sources faces headwinds. Oil demand for heavy commercial road transport is expected to increase with the expansion of the global economy, particularly in Asia, as oil alternatives remain limited. As an example, batteries are still too heavy and large to fit in Class 8 trucks. Also, even if you do, it takes too long to charge. Battery swapping, in which low-charge batteries are replaced with fully charged ones at specialized stations, has shown promise in China, but only accounts for a small portion of the electric truck fleet. Catenary charging and inductive charging (how to charge an electric car while it's running) could be a solution, but they're currently too expensive. True, Volvo and Tesla have started producing and delivering electric semi-trucks, but their numbers are still small and will continue to be that way in the medium term.

The maritime industry faces many of the same challenges as heavy-duty trucks. Efficiently and affordably transporting large cargo across oceans requires energy-dense fuels, secure storage and transportation, and established supply chains. Alternatives like ammonia and methanol may meet some of these requirements, but they still cannot beat oil on key metrics such as affordability and energy density. Furthermore, due to the rapid aging of the world's shipping fleet, fleet turnover is expected to slow down.

Sustainable Aviation Fuel (SAF) is an environmentally friendly alternative to traditional jet fuel. Although SAF has the potential to grow significantly in the aviation industry in the 2030s and beyond, it will not have a significant impact on the aviation industry in the next five years. Despite massive efforts from airlines and the International Civil Aviation Organization's (ICAO) Corsia program, SAF's share will now be less than 5% of jet fuel demand by the end of this decade. This corresponds to less than 0.4% of world oil demand.

There is no need to wait for alternatives, as bus and rail transport are already available and have proven to be very effective. Recent electrification trends in these two sectors in China, India, and Europe will continue in the coming years thanks to government policies. But even if these two sectors were fully electrified over the next 15 years, they currently represent less than 3% of oil demand, so the maximum reduction in oil demand by 2030 would be 500,000 to 800,000 barrels per day. It will stay to a certain extent.

fixed department

The fixed sector, including petrochemicals, industry, construction, non-energy use, energy self-use, power, and agriculture, will account for 42.3% of global oil demand in 2024, making it a key element of the energy transition. There is. In the petrochemical sector, demand for plastics is expected to surge in the coming years due to the expansion of the global middle class, with petroleum and natural gas liquids (NGLs) becoming the raw materials used to produce plastics. . To reduce the demand for virgin raw materials, mechanical and chemical recycling rates need to be increased. However, achieving this will require greater investment in research and development as well as recycling supply chains. It is important to remember that the global plastic recycling rate currently accounts for only 8% of total plastic consumption, and there is little evidence that recycling rates are likely to increase significantly by the end of the decade.

Oil demand in the construction sector is proving more resilient than expected just a few years ago. In regions where natural gas networks are not available and where winters are long and frigid, oil in the form of liquefied petroleum gas (LPG), kerosene, or diesel oil remains the most efficient energy carrier for space heating and water heating. Heat pumps are typically very efficient at heating in warm climates, but tend to be less effective in extremely cold regions. Finally, in countries that still rely on burning biomass for cooking, such as sub-Saharan Africa, LPG has the potential to become a cleaner energy carrier, reducing oil consumption to 1.5 million yen per day. Barrel may increase.

In the industrial sector, high energy densities are essential to achieve the high temperatures required for operations such as steel production, cement production, petrochemicals, and refining subsectors. Although hydrogen is considered the most viable low-carbon energy carrier to replace oil, it is unlikely to become a strong competitor in the next five years due to high costs and an underdeveloped supply chain.

Rystad Energy's research confirms that oil demand remains stable and that shifting the capital stock associated with its consumption will take time and resources. It also reminds us of the importance of understanding the entire energy system end-to-end, not just the petroleum system. It is still possible to reduce global emissions in the medium term if other energy sectors adopt clean technologies and renewable energy at a faster pace. In this context, the rapid adoption of solar power in power generation, replacing coal, has done just that over the past few years. As a result, rapid reductions in global emissions remain within reach, even as oil demand increases.