The fossil fuel industry is on the verge of a major decline as the clean energy economy continues to flourish, according to a report by the International Energy Agency (IEA). The IEA predicts that global demand for fossil fuels will reach its peak within the next decade.
“In all scenarios, the momentum behind the clean energy economy is enough to produce a peak in demand for coal, oil, and natural gas this decade, although the rates of post-peak decline vary widely,” stated the IEA in its report released on Tuesday.
The report specifically highlighted that oil demand could reach a maximum level of 102 million barrels per day by the late 2020s, but would then gradually decline to 97 million barrels per day by 2050. Following this peak, demand for oil is expected to enter a period of “undulating plateau” that could last for several years.
Furthermore, the IEA predicts that global natural gas demand, which had been steadily increasing by approximately 2% annually since 2011, will now slow down to a 0.4% yearly pace until 2030. Additionally, global coal demand is expected to weaken as major consumers, such as iron and steel producers, transition away from coal.
The IEA’s report also highlighted the impact of geopolitical turmoil, persistent inflation, and high levels of debt on commodity volatility, particularly in the oil market. These factors have significantly disrupted global energy markets.
The findings of this report align with earlier statements made by IEA Executive Director Fatih Birol, who stated in a Financial Times column that the era of uninterrupted growth for fossil fuel demand is nearing its end. Birol emphasized that this decade marks the first visible peak in demand for each type of fuel, occurring earlier than previously anticipated.
In contrast, the IEA report emphasized the significant growth and dynamism of clean energy investments worldwide. The Inflation Reduction Act, implemented last year, has injected substantial funding into clean energy projects, contributing to the acceleration of decarbonization efforts.
However, despite the positive outlook for clean energy, renewable energy stocks have faced challenges due to cost inflation, supply chain disruptions, and rising borrowing costs, particularly with expectations of Federal Reserve rate hikes. This has led to decreases in the S&P Global Clean Energy Index, with year-to-date declines of 33.51% for companies like SolarEdge and 62% for Enphase Energy.
As the clean energy sector continues to thrive, the era of fossil fuels is gradually coming to an end. The IEA’s report underscores the need for countries and industries to embrace sustainable energy alternatives and prepare for a future without fossil fuels.
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