EU could run out of oil in a decade

Report found production will decline faster than bloc is curbing reliance on fossil fuels

The world could reach “peak oil” sooner than expected and that may be a problem for Europe. The moment global oil production reaches its highest point was expected to be around 2030, but Norwegian researchers from the Rystad Energy consultancy say it could occur in 2027 or 2028. As a result, the EU could suffer an oil shortage within a decade, with supply drying up faster than the demand for fossil fuels, according to climate think tank The Shift Project.

Crude consumption dropped as much as one-third at the height of the coronavirus crisis in April, as lockdowns and travel restrictions forced people to stay home. Demand has begun to recover, but there is growing acknowledgment across the industry that the impact of the virus may reverberate for years to come.

In particular, the analysis found that oil production from Russia and the former USSR, which provide more than 40% of the EU’s oil supply, has already entered “a systematic decline” which would outstrip the rate at which the EU has curbed its use of oil over the last 10 years. Africa’s oil production, which makes up more than 10% of the other EU’s oil supplies, is also expected to decline sharply over the next decade.

"People will be reluctant to travel by air for some time," said Magnus Nysveen, head of analysis at Rystad Energy said, adding that this would lead to a reduced demand for jet fuel.

Meanwhile, he said, drop-off in demand, coupled with increasing environmental consciousness among investors, would discourage oil producers from pumping money into projects in more remote areas with long lead times, meaning areas previously expected to be explored for oil would be left untouched. This would cause drilling activity to plunge in the near term, leading to a spike in prices between 2023 and 2025 - just as electric vehicles become competitive with the combustion engine. Thus, Nysveen concluded the forecasts offer “yet another reason” for economies to reduce their reliance on oil

The countries which invest heavily in electric vehicles, for example, will be able to avoid the economic pain of surging fuel prices while those that do not may be forced to accelerate the shift away from petrol and diesel cars to avoid the higher costs.

“The impact on society from an undersupplied oil market is largely under-communicated, so a rapid energy transition is crucial not only for the climate but also to avoid enduring recessions in emerging markets triggered by undersupply of oil and energy,” Nysveen explained.

More on this subject: Coronavirus

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