If world governments deliver on their national energy and climate pledges, oil and gas demand would plummet 45% below current levels by mid-century.
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Next week’s UN climate summit will be a “moment of truth” for the oil and gas industry, which currently supplies more than half of the global energy supply, according to a new report.
The International Energy Agency’s (IEA) latest report on the implications and opportunities arising from the momentum building up ahead of COP28 says the time has come for fossil fuel companies to set out a clear pathway to net zero amid a rapidly intensifying climate crisis, largely fuelled by their activities and products.
According to the west’s energy watchdog, global oil and gas demand is expected to peak this decade and be about 45% lower than today’s levels by 2050, a significant change driven by significant structural changes in the energy sector in recent years, including the rapid expansion of electric vehicles and renewable energy sources. Nevertheless, the IEA argues that the decline will not be fast enough to align with the Paris Agreement and, in order to keep global warming below 1.5C, oil and gas demand would need to fall by 75% by mid-century.
As world leaders and key players prepare to gather in Dubai next week for the long-awaited UN climate summit, the report explores ways in which oil and gas companies can play their part in the energy transition.
First and foremost, companies should set ambitious targets aimed at reducing emissions at the source –meaning emissions generated from their own operations, the report argues. Still, more than half of all oil and gas output currently comes from companies without clear emissions reduction targets in place.
The oil and gas industry is a critical component of the global energy mix, accounting for approximately 60% of the world’s energy consumption. Together, they employ nearly 12 million people worldwide and generate trillions of dollars in revenue each year. Nevertheless, despite being the largest contributor to greenhouse gas emissions, they account for just 1% of total clean energy investments globally.
In order to align with global climate goals, companies should invest at least half of their annual investment in clean energy projects this decade, the IEA said, arguing that carbon capture projects should be no substitute for cutting emissions and “cannot be used to maintain the status quo.” Despite scepticism around carbon capture and storage, most industry players still over rely on this technology.
US giants Chevron and ExxonMobil, which together account for more than 10% of global carbon emissions since 1965, are dialling back clean energy commitments and instead doubling down on fossil fuels, even as the rest of the world is moving off them. Both companies took home record profits in 2022 following last year’s surge in prices and instability sparked by Russia’s invasion of Ukraine and recently announced expansion strategies.
Earlier this year, Exxon Mobil, the largest non-government-owned company in the energy industry, announced it would acquire Pioneer Resources for $60 billion, and just last month, oil giant Chevron said it is buying independent oil and natural gas company Hess Corporation for US$53 billion.
IEA executive Fatih Birol said that companies needed to be “letting go of the illusion that implausibly large amounts of carbon capture are the solution”, adding that “the industry needs to commit to genuinely helping the world meet its energy needs and climate goals.”
“The oil and gas industry is facing a moment of truth at COP28 in Dubai. With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible,” he said.
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