In its central scenario, a vaccine and therapeutics could mean the global economy rebounds in 2021 and energy demand recovers by 2023, the IEA, which advises Western governments on energy policy, said in its annual World Energy Outlook.
But under a “delayed recovery scenario”, the timeline is pushed back two years, it said.
In such a case, the IEA predicts “a deeper near-term slump erodes the growth potential of the economy, high unemployment wears away human capital, and bankruptcies and structural economic changes mean that some physical assets become unproductive as well.”
The Paris-based IEA sees global energy demand falling by 5% in 2020, CO2 emissions related to energy by 7% and energy investment by 18%.
Demand for oil is set to fall by 8% and coal use by 7% while renewables will see a slight rise.
Graphic – Energy sector CO2 emissions:
Overall, the energy watchdog said it was too soon to say whether the pandemic had acted as a spur or a setback to governments and the energy industry as they seek to make the industry more sustainable.
IEA chief Fatih Birol told Reuters that policy makers were lagging behind: “We are far from reaching our climate goals with the existing policies around the world.”
“The era of global oil demand growth will come to an end within the next 10 years, but in the absence in a large shift in government policies, I don’t see a clear sign of a peak. A global economic rebound would soon bring oil demand back to pre-crisis levels,” he said in an interview.
Graphic – Oil Demand:
Uncertainty over future demand and the oil price plunge in 2020 could mean that oil producers are unsure how to gauge investment decisions leading to a mismatch in supply and demand, stoking future market volatility, the IEA warned.
In its central scenario, the IEA predicts “upstream investment picks up from the low point in 2020, underpinned by a rise in the oil price to $75 a barrel by 2030. However, it is not clear whether this investment will come in time and, if it does come, where it will come from.”
Graphic – Value of future oil and gas production: