This is according to the International Energy Agency, which said in a new report on Thursday that energy demand could drop 6% this year if bottlenecks persist for many months and the economic recovery is slow.
Such a scenario is “increasingly likely,” according to the IEA, adding that a drop of this magnitude would be seven times greater than the drop following the global financial crisis of 2008. Electricity demand is expected to plunge by 5% in 2020, the biggest drop since the Great Depression.
“This is a historic shock for the entire energy world,” said Fatih Birol, executive director of the Paris-based agency, in a statement. “It is still too early to determine the longer-term impacts, but the energy sector emerging from this crisis will be significantly different from the one that preceded it. “
Demand for coal, oil and gas was reduced following closures to contain the spread of the virus, which dampened economic activity and virtually stopped international air travel. Demand for oil in particular could drop 9%, wiping out eight years of growth.
Only renewable energy resisted, with demand for electricity produced from sources such as solar and wind power is expected to increase by 1% in 2020. Low operating costs have given a boost.
This momentum – combined with the glut of supply resulting from a brief but brutal price war between Saudi Arabia and Russia – has rocked the oil market. Last week, US oil prices turned negative for the first time. This meant that traders actually paid people to take the crude away from them.
Oil prices have since recovered but remain close to their lowest levels for decades. This is expected to trigger a wave of bankruptcies and job losses in the industry as production slows to meet declining demand.
The drop in energy consumption is due to developed economies, according to IEA. The agency predicts demand will drop 9% in the United States and 11% in the European Union.
Some European countries and parts of the United States are beginning to lift strict lockdowns in order to gradually restart their economies. The rate at which these limits are relaxed will have a major effect on energy consumption; the IEA estimates that each month of global foreclosure reduces annual demand for electricity by around 1.5%.
In the meantime, carbon emissions are considerably lower. Energy-related carbon dioxide emissions are expected to drop by almost 8% in 2020 to their lowest level since 2010, according to the IEA. It would be the largest drop in emissions on record.
Birol said the decline – the result of a health crisis and an economic shock – was “nothing to applaud”.
“If the consequences of the 2008 financial crisis continue, it is likely that we will soon see a sharp rebound in emissions as economic conditions improve,” he said.
The joker is the behavior of governments and consumers as the pandemic recedes. Analysis by the IEA shows that governments directly and indirectly generate more than 70% of global energy investment.
If they choose to promote renewable energy as part of their stimulus packages, this could accelerate a transition already underway. People may also be very reluctant to travel abroad as much as they did before, and working from home could become more common, reducing suburban traffic.
German Chancellor Angela Merkel said this week that tackling climate change must be an integral part of the solution to the coronavirus pandemic.
“The design of economic stimulus packages represents a major opportunity for governments to link economic stimulus efforts with clean energy transitions – and steer the energy system on a more sustainable path,” said the IEA in its report.