Reality: It’s 2022, and Strong Global Oil Demand is Here to Stay

its 2022 and global oil demand is here to stay - the world needs more Canadian energy

Despite predictions of "peak oil" over the years, growing global oil demand seems here to stay, at least in the short to medium term. Following the global energy crisis of 2021 – and its 2022 sequel – it's clear the world will need all forms of supply to keep the lights on and the economy rolling for families around the world.

Given continued growing demand and healthy reserves, it’s worth underlining the fact there’s recently a move away from short-term "peak oil" scenarios.

Non-governmental organizations (NGOs) that oppose fossil fuels celebrated the idea that the "end of oil" was in sight as the International Energy Agency (IEA) released its Net Zero by 2050 pathway last May. Now, more than six months later, the IEA and other similar organizations see global oil demand roaring back, thereby largely disproving the NGO statements.

It’s odd, in that context, that opponents of Canada's energy sector continue to send out messages like the one tweeted below. We know the below statement is suspect given its reference to 2040 doesn’t line up with its link that makes claims about 2050. But in our effort to encourage balanced, fact-based and informed conversations about Canada's world-class resources sector, it’s important to point out that there are even more problems with the tweet below than just that.

Let’s go through those problems, point by point.

#1 - Current "Peak Oil" Projections

global peak oil demand projections early 2022

The tweet’s author should know commodity demand levels are time-sensitive. For example, global oil demand at the beginning of 2020 was significantly different from what it is today. But the tweet misleads readers to believe that oil demand will drop 75 percent by 2040 based on a scenario published back in May, 2021. 

From current trends, we know the likelihood of such a substantial drop in demand within 18 years is highly improbable.

Further, trusted energy research organizations, in their most recent oil demand projections, say demand will likely grow for many years – at least judged by the way the world is today. In fact, while some of these groups see 'peak' oil as arriving sometime in the mid-to-late 2020s, others don’t expect it until around 2040.

Current global trends give us some much-needed insight into what is expected for oil consumption levels over the next decades. A quick online search easily identifies the above points.

#2 - Global Oil Demand & Energy Crises

Minister of Natural Resources Says Oil Resources Valuable, Canada to Continue to Extract Value from Resources like Norway, UK and US

Several demand projections point to a world that’s hungry for more oil; that fact won’t change anytime soon. The IEA, U.S. Energy Information Administration, Wood Mackenzie, S&P Global Platts, BP Energy, and OPEC are among the organizations predicting 'peak' oil will happen sometime from 2019 (already easily disproved by real-life experience) to 2040 and beyond.

Meanwhile, current global energy supply crises are forcing many of the world's largest emitters to rethink their "transition" strategies altogether. Instead, these countries are opting for national energy security through the continued use of natural gas, coal, oil, nuclear and other established forms of power generation. As a result, demand for fossil fuels is reaching record highs and is poised to continue to grow alongside the energy needs of emerging market economies.

See some of the news headlines from around the world that indicate we can't just turn our backs on fossil fuels overnight; rather, a gradual energy transition will take time.

#3 - A Decades’ Difference?

IEA global oil demand projection by 2026 - 104.1 million bpd, up 4.4 million over 2019 levels

When citing reports, accuracy – particularly on complex data – is key. In this case, the above tweet inaccurately suggests the IEA's Net Zero to 2050 pathway – emphasizing '2050' – will see global oil demand drop 75 percent by "2040." We know this isn't what the IEA reported.

In fact, the Paris-based agency, at page 47 of the referenced source, describes what a net zero pathway by 2050 might look like for global energy markets. It states that, “…coal demand would decline by 90 per cent, oil by 75 per cent and natural gas by 55 per cent by 2050.”

It’s possible the tweet’s author mis-typed the passage. Nevertheless, the reference to a substantial drop in global oil demand by "2040" is inaccurate and misleading.

A quick online search easily finds that demand for fossil fuels like oil is expected to increase. Searching "global oil demand projections" in Canada turns up the IEA's Oil Market Report of October 2021 as a top-five result. The report projects demand will reach 104.1 million barrels per day (bpd) by 2026, up 4.4 million bpd over 2019 levels. Read a little deeper into the report and you'll find the IEA had to revise its 2021 and 2022 forecasts upward by 170,000 bpd and 210,000 bpd to adjust for higher-than-expected demand levels.

Sure, we all make mistakes. But when discussing a sector that provides hundreds of thousands of jobs for Canadians and generates hundreds of billions of dollars in revenues for governments, accuracy is vital.

Global oil demand is growing – not dropping – and Canadian producers that prioritize sustainability should be suppliers of choice in a world increasingly focussed on improved environmental outcomes. More Canadian oil in global markets benefits not just the global environment but our citizens, workers, families, communities and governments.

#4 - Canadian Oil Production Trends & Prices

Canada Oil and Gas Sector Revenues Generated for Governments 2000-2019

The tweet’s gloomy predictions for Canadian oil haven’t materialized. Indeed, the author seems to ignore current trends, statistics and analyses that show Canadian oil production is at an all-time high and our governments (and those who partake in any publicly-funded program) are reaping the rewards.

After a rough few years in 2020-21, Alberta – responsible for about 80 per cent of Canada's oil production – is soaring back towards balanced budgets as a result of sustained high WCS benchmark prices. Meanwhile, the IEA is predicting that Canadian oil production will smash all records in 2022

These oil revenues are used to pay for schools, hospitals and roads - and the people who staff and build them. Alberta has contributed more than $600 billion to the rest of Canada, largely a result of the prosperity generated by the oil and gas sector. And when it comes to responsibly produced Canadian oil and gas for global markets, then the more we sell, the more revenues we generate, and the more social benefits we create for our communities here at home.

#5 - Global Oil & Gas Investment

five examples of global oil and gas investment in 2022 and beyond

Demand for oil globally has continued its historical trend to the extent that, in this new year, we’ve returned to previous record highs after a dip in consumption. 

Today, major oil producers worldwide are making huge investments in the development of oil and gas fields. Some examples include:

  • UAE to invest $127 billion in 2022-2026 as oil and gas reserves rise
  • Norway to spend $8.8 billion to develop the world's northernmost oilfield
  • Brazil raises investment plan to $68 billion through 2026
  • Iran plans on $145 billion of investment into oil and gas sector over next eight years
  • Kuwait to invest $6.1 billion in oil exploration over next five years

Last May, the IEA suggested that no new investments in oil and gas be made if the world wanted to reach net zero emissions by 2050. It appears global energy producers aren't heeding that call, another point the tweet’s author could easily have determined with a quick online search.

See the following article for more examples of nations working to attain more global market share in a world that’s increasingly oil-hungry:

Let’s Have a Balanced Conversation

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Let's have a balanced conversation around global oil and gas demand and why Canada should be a supplier of choice with its exemplary record on Environmental, Social and Governance indices.

Our nation's sustainability record has earned Canadians the right to say that, as long as the world needs oil, it should come from Canada thereby benefiting our workers, families and communities at home AND the global environment.

When discussing a topic that lends itself to complicated data and specific time horizons, inaccurate and misleading characterizations can hurt the long-term prosperity of hundreds of thousands of families and our country at large. Isn’t it time to push for accuracy, balance and sound research?