Indications have emerged that a growing demand for renewable sources of energy, coupled with rising fuel efficiency and a transition to electric vehicles, will hit the oil sector.
Consequently, demand for oil would slow over the next decade, before flattening by the 2030s, the International Energy Agency, IEA, stated in its latest World Energy Outlook, just released.
The report stated that for the time being, however, production will continue to rise, and the United States will account for 85 percent of the increase in production over the next decade. In the next five years, the US' shale output will exceed Russia's total production, the report stated. It also explained that China will overtake the European Union to become the largest net importer. As India's economy expands it will import about 90 percent of its oil, which will become a "major factor in global trade and energy security."
Under the sustainable development scenario, however, oil demand is forecast to peak in the next few years. "Aggregate fossil fuel production falls precipitously by 2040. Natural gas output rises by around 8 percent to 2030 before falling below today's levels in 2040. Oil production peaks in the next few years and drops to 65 million barrels per day (a level not seen since 1990) as the shift to alternative modes in the transport sector takes away its main demand base," the report said.
The report also stated that significant investments will be instrumental in developing things like battery storage and carbon capture systems, as well as improving overall energy efficiency in order to reduce global emission levels.
"A sharp pick-up in efficiency improvements is the single most important element that brings the world towards the Sustainable Development Scenario," the IEA said.
Under the sustainable development scenario, spending on energy efficiency will reach $16.7 trillion by 2040, which is around $625 billion per year for the next ten years, and nearly $920 billion per year from 2030 - 2040.
Similarly, investments in renewables would need to reach $650 billion per year for the next ten years in order to meet energy goals. According to the report, as things stand right now, under the stated policies scenario, energy efficiency spending is expected to total $11.7 trillion by 2040, with renewable spending projected to reach $440 billion per year.
Given the dependence on coal in many emerging Asian economies, the report also discussed ways to reduce emissions from ongoing production, including retrofitting plants with carbon capture technology.