WASHINGTON (MaceNews) – Global energy demand will drop by 6% in 2020 – far outstripping the decline witnessed after the 2008 global financial crisis, and a rebound will be heavily-dependent on how long measures to contain the coronavirus pandemic remain in place, the International Energy Agency said Thursday.
The group’s 2020 Global Energy Review said the projected decline would be the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer, or the combined 2019 demand of France, Germany, Italy and the United Kingdom. And the drop could be worse if there is a second wave of COVID-19 infections later this year.
“The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus. For instance, the IEA found that each month of worldwide lockdown reduces annual global energy demand by about 1.5%,” the report said. On the other hand, “if lockdowns are shorter and the global recovery is more rapid, the decline in global energy demand across 2020 could be limited to 3.8%.”
The IEA projects advanced economies will see the biggest declines, with demand expected to fall by 9% in the United States and -11% for the European Union. Demand in China is projected to decline by more than 4%, a reversal from average annual demand growth of nearly 3% between 2010 and 2019. In India, energy demand is also projected to decline for the first time.
In terms of demand for specific fuels, the IEA said all except renewables will experience their greatest contractions in demand for decades, with the latter seeing “demand growth across the remainder of 2020, regardless of the length of lockdown or strength of recovery.”
Oil demand could drop by 9%, or 9.3 million barrels per day on average across the year, the report said, dropping back to 2012 levels. It expects gasoline demand to fall by 590,000 barrels per day on average, citing the postponement of large events such as the Tokyo Olympics and prolonged lockdowns in some countries. For 2020 as a whole, IEA forecasts gasoline consumption to decline by 2.9 million bpd, or 11%.
“A reduced lockdown period and a strong rebound of the economy in the second half of 2020 could reduce the annual decline in oil demand to 6.5 million bpd,” the report said. “Declines in oil demand could be even greater, on the other hand, if a second wave of Covid-19 occurs in the second half of 2020, constraining activity and oil demand across most of 2020.”
The IEA warned that global natural gas demand could decrease by 5% in 2020, a lesser decline compared to oil because natural gas is less exposed to the collapse in demand for transportation fuels.
Nevertheless, it would mark the first drop in annual consumption since 2009, when consumption fell by 2%, and the largest recorded year-on-year drop in consumption since natural gas demand exploded during the second half of the 20th century.
However, “faster post-lockdown recovery in Europe and North America and shorter lockdowns in other regions would reduce the negative impacts on Asian manufacturing economies and gas exporting regions, leading natural gas consumption to decrease by about 2.7% instead of 5%,” the report said.
In terms of the various uses of natural gas, the IEA projects gas consumption in power generation would drop by around 7%, accounting for almost 60% of the decline in global demand. Demand from the industrial sector could decline by 5% – about 25% of the global decrease. “On top of the direct impact of reduced activity during lockdowns, natural gas demand from industry is further dampened by the slowdown in consumer spending for manufactured goods, which affects gas use in export-driven economies, especially in Asia,” the report said.
As for the natural gas utilized in energy sector operations, the IEA expects a 4% drop in consumption – 10% of the overall fall in gas demand. “This reflects the overall fall in global supply that reduces gas needs for upstream operations, as well as for energy transformation (refining) and transportation (pipeline gas compression),” it said.
Meanwhile, “most of the impact on gas demand in the residential and commercial sectors is expected to come from the already observed drop in Q1 2020 caused by mild temperatures – with some additional loss in the commercial sector for non-heating uses during the lockdown periods,” the report added.
Finally, the IEA expects global electricity demand to fall by 5% in 2020, the largest decline since the Great Depression and eight times the reduction in 2009 caused by the global financial crisis.
“A faster recovery would reduce electricity demand by 2% in 2020, as all areas of economic activity resume. But wider spread of Covid-19 in Africa, Latin America and other areas of the developing world, and a second wave in autumn in advanced economies, could lead to a decline of greater than 5%,” the IEA said.