The global demand for oil, coal and gas, the main sources of fossil fuels, is expected to peak by 2030, according to the International Energy Agency (IEA). This is a significant shift from the past decades, when the demand for fossil fuels was steadily increasing and dominating the world’s energy supply. The peak in demand is driven by several factors, such as the growth of renewable energy, the improvement of energy efficiency, the impact of the Covid-19 pandemic, and the implementation of climate policies. However, the peak in demand does not mean the end of fossil fuels, as they will still account for 73% of the global energy supply by 2030. Moreover, the peak in demand will vary across different regions and sectors, creating new challenges and opportunities for the oil and gas industry. In this article, we will explore the trends and implications of the global demand for oil, coal and gas, and how the industry can adapt to the changing energy landscape.

Oil Demand: Declining in Transport, Growing in Petrochemicals

The global demand for oil is projected to peak in 2026, at 104.1 million barrels per day (mb/d), and then decline to 103.2 mb/d by 2030. The main driver of the peak and decline is the transport sector, which accounts for more than half of the oil demand. The transport sector is undergoing a rapid transformation, as the adoption of electric vehicles, biofuels, hydrogen and other alternative fuels increases, and as the efficiency of conventional vehicles improves. The IEA estimates that the number of electric cars will grow from 11 million in 2020 to 145 million in 2030, displacing 2.5 mb/d of oil demand. The aviation sector, which was severely affected by the Covid-19 pandemic, will also see a slower recovery and a lower growth of oil demand than before the crisis. However, not all sectors will see a decline in oil demand. The petrochemical sector, which uses oil as a feedstock to produce plastics, fertilizers, synthetic fibers and other products, will see a strong growth of oil demand, from 13.4 mb/d in 2020 to 16.8 mb/d in 2030⁴. The petrochemical sector is driven by the increasing demand for consumer goods, especially in emerging markets, and by the lack of effective recycling and waste management systems. The IEA warns that the petrochemical sector could become the largest source of oil demand growth in the coming years, unless more action is taken to reduce the use of single-use plastics and to promote circular economy.

Coal Demand: Falling in Power, Rising in Industry

The global demand for coal is projected to peak in 2024, at 7.4 billion tonnes of coal equivalent (tce), and then decline to 7.1 tce by 2030. The main driver of the peak and decline is the power sector, which accounts for more than 70% of the coal demand. The power sector is undergoing a rapid transition, as the deployment of renewable energy, such as solar, wind and hydro, increases, and as the retirement of coal-fired power plants accelerates. The IEA estimates that the share of renewable energy in the global power generation will grow from 29% in 2020 to 43% in 2030, while the share of coal will drop from 36% to 28%. The power sector is also influenced by the climate policies and regulations, such as carbon pricing, emissions trading and coal phase-out plans, that aim to reduce the greenhouse gas emissions from coal combustion. However, not all sectors will see a decline in coal demand. The industrial sector, which uses coal as a fuel and a feedstock to produce steel, cement, chemicals and other products, will see a slight growth of coal demand, from 1.4 tce in 2020 to 1.5 tce in 2030. The industrial sector is driven by the increasing demand for infrastructure and construction, especially in developing countries, and by the lack of viable alternatives to coal in some processes.

The IEA notes that the industrial sector could become the largest source of coal demand growth in the coming years, unless more action is taken to improve the efficiency and innovation of the industrial processes and to promote the use of low-carbon materials.

Gas Demand: Growing in All Sectors, Especially in Asia

The global demand for gas is projected to peak in 2030, at 4.4 tce, and then remain stable until 2040⁴. The main driver of the peak and stability is the balanced growth of gas demand across all sectors, such as power, industry, buildings and transport. The gas demand is supported by the availability and affordability of gas resources, especially from unconventional sources, such as shale gas and coalbed methane. The gas demand is also favored by the environmental benefits of gas, such as lower emissions and air pollution than coal and oil, and by the flexibility and reliability of gas, which can complement the variable and intermittent renewable energy. The gas demand will vary across different regions, with Asia being the largest and fastest-growing market for gas. The IEA estimates that the gas demand in Asia will grow from 1.5 tce in 2020 to 2.1 tce in 2030, accounting for more than 80% of the global gas demand growth. The gas demand in Asia is driven by the increasing energy needs of the growing population and economy, and by the diversification of the energy mix away from coal and oil. China, India and Southeast Asia are the main contributors to the gas demand growth in Asia, as they expand their gas infrastructure and import capacity, and as they implement policies to promote the use of gas in various sectors.

Implications for the Oil and Gas Industry: Adaptation and Diversification

The peak in demand for oil, coal and gas will have significant implications for the oil and gas industry, which will have to adapt to the changing energy landscape and diversify its portfolio and strategy. The oil and gas industry will face several challenges, such as the decline in revenues and profits, the increase in competition and pressure, the uncertainty and volatility of the market, and the risk of stranded assets and obsolescence. The oil and gas industry will also have to deal with the social and environmental expectations and responsibilities, such as the alignment with the Paris Agreement and the Sustainable Development Goals, the reduction of greenhouse gas emissions and flaring, the improvement of safety and governance, and the enhancement of transparency and accountability. However, the peak in demand for oil, coal and gas will also create new opportunities for the oil and gas industry, which can leverage its strengths and capabilities to innovate and transform. The oil and gas industry can capitalize on the growing demand for petrochemicals and gas, especially in Asia, by investing in new projects and markets, and by improving the efficiency and quality of its products and services. The oil and gas industry can also diversify its portfolio and strategy by expanding into new sectors and sources of energy, such as renewable energy, hydrogen, biofuels and carbon capture, utilization and storage. The oil and gas industry can also collaborate with other stakeholders, such as governments, regulators, customers, investors and civil society, to develop and implement solutions that can address the energy and climate challenges and opportunities. The oil and gas industry is at a critical juncture, as the global demand for oil, coal and gas is set to peak by 2030. The industry will have to adapt to the changing energy landscape and diversify its portfolio and strategy, in order to survive and thrive in the post-peak era. The industry will also have to contribute to the global energy transition and climate action, in order to ensure the sustainability and security of the energy supply and demand. The industry will have a key role to play in the future of energy, as it can provide the energy that the world needs, while protecting the environment that the world depends on.