Covid-19, electrification bring hydrocarbon demand peak forward to 2027

KUALA LUMPUR: Aggregate fossil fuel demand is set to peak in 2027 with oil peaking in 2029 and gas in 2037, partially due to the impacts of Covid-19.

According to a research by McKinsey & Company, while coal demand peaked already, peaks in demand for oil and gas were not far behind – falling in 2029 and 2037 respectively.

The firm said in its Global Energy Perspective 2021 report that the pandemic had resulted in a profound reduction in energy demand.

“Emerging economies will likely double their share of the global energy mix, with particularly strong growth in Africa, Asean and India. At the same time China will likely see a plateau in energy demand by 2030.

“McKinsey expects this will take between one to four years to recover – with electricity and gas demand expected to bounce back more quickly than demand for oil,” it said.

However, the firm said the demand for fossil fuels would never return to its pre-pandemic growth curve.

“Over the long-term, the impacts of behavioural shifts due to Covid-19 are minor compared to “known” long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend towards electric vehicles, whose impact is estimated to be three to nine times higher than the pandemic’s by 2050,” it added.

McKinsey senior partner Christer Tryggestad said while the pandemic had provided a substantial shock for the energy sector across all fuel sources, the story of the century was still a rapid and continuous shift to lower-carbon energy systems.

Tryggestad said the share of electricity in the energy mix was set to grow by around 50 per cent by 2050 and was set to capture all global energy growth as hydrocarbon consumption plateaus.

“However, in our reference case, fossil fuels continue to play a significant role for the foreseeable future,” he said.

Meanwhile, Tryggestad said there was still a long way to go to avert substantial global climate change.

According to McKinsey estimates, annual emissions would need to be around 50 per cent lower in 2030 and about 85 per cent lower by 2050 than current trends predict to limit the global temperature increase to 1.5 celsius.

“The importance of policies has increased in the past year. Despite the increased momentum towards decarbonisation, many governments still need to translate ambitious targets into specific actions.

“Additionally, given the unparalleled size of many economic recovery packages post Covid-19, the focus of the stimulus measures will play a key role in shaping energy systems in the decades to come,” he added.

Source: NST