Demand for Canadian oil to fall off by end of decade
Environment groups in Canada say governments and the oil and gas industry can no longer pretend there is an economic case for expanding oil production after the latest international energy forecast suggests demand for Canada’s oil will fall before the end of this decade.
But the International Energy Agency also said there are new opportunities for oil and gas companies to turn their “skills, competencies and resources” into a competitive advantage for clean energy technology. For its part, the Canadian oil industry argues it is more committed to being cleaner and greener than most other producers and should be used as an investment to help fund clean technology in other areas.
The International Energy Agency projected in a report this week that under existing climate policies oil production in Canada will grow by about 700,000 barrels a day by 2030 before it starts to recede.
If Canada implements the new policies the Liberals have promised — including mandating more electric car sales and capping emissions from oil and gas production — available Canadian oil will fall by 100,000 barrels a day by 2030.
And in a net zero policy push — where any greenhouse gases still emitted are captured by 2050 — oil supply will fall even faster.
Globally, the IEA predicts that with existing policies, oil demand will peak around 2030. With policies to meet more stringent targets by 2030, demand will peak by 2025. Under net zero, demand peaks even earlier and will be cut by one-fifth in fewer than 10 years, and by more than 75 per cent by mid-century.
Increasingly, Canada’s higher cost, more emissions-intensive oil will be pushed out of the market by cheaper oil in the Middle East and Russia, the report suggests.
“The IEA report does a good job of saying, ‘Look, particularly countries like Canada where it’s high cost, high carbon, we’re going to get squeezed,’” said Keith Stewart, a senior energy strategist at Greenpeace Canada.
The international agency is also clear that the only scenario where the world hits its Paris climate agreement goal to minimize global warming is the net-zero plan, and said in that case there is no good investment to be made in expanding oil production after this year. That’s not just in Canada, but globally.
Stewart said the report highlights it is time for Canada “to manage the decline of the oil industry and the growth of alternatives.”
“I think this report very clearly says, you’re going to sell less oil, deal with it,” he said. “And the minute we actually start planning for that … then we can get on with the job and reap those benefits.”
Tim McMillan, president of the Canadian Association of Petroleum Producers, said Canada’s oil and gas industry is a “leading investor in emissions reduction and clean technology” and investments in it will both support hundreds of thousands of jobs and provide the government with revenues to fund clean technology.
“As we watch nations around the world today struggling with an energy crisis and failing to provide responsible energy to their citizens, Canada must step up and offer a safe haven for natural gas and oil investment, so our trading partners do not have to rely on others who are not as committed to lowering their emissions compared to Canada for their energy needs,” he said.
Natural gas demand is not as quickly affected as oil, in part because many countries — including Canada — are going to use it to replace coal as a less-dirty source of electricity, or to make hydrogen.
But even so, in a net zero world, demand for natural gas will stop growing around 2025, and the IEA predicts there are no new natural gas projects needed beyond those already in development. By 2050, it expects natural gas will provide only one per cent of the world’s power, down from 20 per cent today.