The Coronavirus pandemic is likely to delay the energy demand recovery across the world to 2025, forecasts the International Energy Agency (IEA). As it predicts, slow economic recovery from the ongoing pandemic threatens to delay a full rebound in the global energy demand.
However, the arrival of a Covid vaccine could revive the global economy in 2021 could accelerate the energy demand recovery to 2023. However, in case the vaccine arrives late and the global economy starts recovering accordingly, the timeline for the energy demand recovery across the world will be delayed by two more years, to 2025.
In such a scenario, the IEA forecasts a deeper near-term slump eroding the growth potential of the economy. Also, there will be high unemployment wearing away human capital, bankruptcies and structural economic changes as well. In that case, several physical assets will become unproductive in the post-Covid world.
According to the Paris-based energy adviser to the Western Governments, global energy demand would decline by 5% in 2020. The CO2 emissions related to the energy sector will drop by 7% and energy sector investment too will slump by 18%. Demand for the oil is set to drop by 8% and coal usage will see a decline by 7%, while the renewables will experience a slight rise in demand, claims IEA.
So far, IEA said that it is too early to predict whether the pandemic has acted as a spur or a setback to the Governments across the world and the energy industry, as the global leaders are trying to make the energy sector more sustainable.
With this uncertainty over the energy demand and the oil price plunge in 2020, the oil producers are unsure how to gauge their investment decisions as these could lead to a mismatch in supply and demand, stoking future market volatility.
As the IEA has predicted, the upstream investment will pick 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.
Faith Birol, Chief of IEA, said to Reuters that the world is far from reaching the climate goals with the existing policies. “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.