The report of the Shift Project, a French climate of reflection, said the risk of reaching a “peak oil supply” in advance of major economies have made the transition to clean energy sources is “an additional compelling reason for the design of a world without oil.”
The analysis was based on data from Norwegian consultancy Rystad Energy, which has found that oil production in Russia and the former USSR, which provide over 40% of the EU’s oil supply, is already entered into “a systematic decline that would exceed the speed at which the european UNION has reduced its use of oil over the last 10 years.Africa’s oil production, which represents more than 10% of the EU’s oil supplies, is expected to fall sharply over the next decade.
The impact of the Covid-19 pandemic threatens to exacerbate the risk of a failure of the oil supply in the years 2020 through the stalling of investment in new oil projects.
Major oil companies should reduce their spending plans for the coming year by nearly a quarter, or nearly $40 billion (£32bn), to overcome the impact of coronavirus, which has caused demand for oil to drop to 25-year lows and pushed down its price.
Rystad Energy, said that the crisis could put before the world peak of oil demand from 2030 to 2027, before the market enters a terminal decline.
Per Magnus Nysveen, head of analysis at Rystad Energy, said: “it is not unthinkable” that the world may still face the threat of a tightening in the supply of oil, and a serious market of soaring prices, even as global oil demand starts to fall.
“The price of oil is driven by sales and not by levels, we can see it clearly now with the price of oil at fairly good level for a hibernation of the oil industry in spite of the demand of oil to levels not seen since 2009,” he said.
The world, the price of oil has climbed above $40 a barrel, after scraping the bottom of $16 per barrel in the wake of the Covid-19 lockdown, because the major oil producers in the Opec oil cartel have agreed to a historic agreement to temporarily reduce the amount of oil they produce.
The price of oil should remain low for at least two more years as global economies recover from the economy and a replica of the pandemic, but could quickly push through the middle of the decade 2020 if oil demand bounces above the world production rate.
“The impact on society from an undersupplied oil market is largely under-reported, thus a fast energy transition is crucial, not only for the climate but also to avoid lasting recessions in emerging markets triggered by the shortage of oil and energy,” Nysveen said.
He concludes the forecasts of the offer “yet another reason” economies to reduce their dependence on oil.
The countries that invest massively in electric vehicles, for example, will be able to avoid the economic pain of higher fuel prices, while those who can not be forced to accelerate the abandonment of the petrol and diesel cars in order to avoid higher costs.