The coronavirus outbreak has caused a “staggering” drop in global energy demand, equivalent to India’s total annual consumption, according to a new analysis that identified the pandemic as the biggest shock to the energy system since the second world war.
Energy demand worldwide could drop 6 per cent in 2020, the International Energy Agency said in an annual review released on Thursday. “We see a staggering decline across all the fuels: oil, gas, coal, electricity, except for renewables,” Fatih Birol, IEA executive director, told the Financial Times.
The plunge will cut global carbon dioxide emissions to levels not seen since 2010, with an unprecedented drop of 8 per cent in 2020, the report found.
“The emissions decline this year will erase the global emissions growth in the last 10 years,” said Mr Birol. However he cautioned that the decline in emissions was likely to be temporary without continued government support for green initiatives. “If the right policies are not put in place, we may well see next year a significant rebound in emissions,” he said.
Renewable power is the only energy source that will experience growth this year, according to the report which is based on data from the first 100 days of the year and includes new forecasts for 2020.
The findings highlight the unprecedented impact of the virus pandemic, which has caused energy demand to plummet as countries go into lockdown, with the biggest impacts felt in the world’s largest economy.
While overall global energy demand is set to fall 6 per cent, the forecasted decline in the US this year is 9 per cent, with an 11 per cent drop expected in the EU. Electricity use will experience its biggest decline since the Great Depression of the 1930s, the IEA said. “The Covid-19 pandemic represents the biggest shock to the global energy system in seven decades,” the report said.
The slump in energy demand this year will be far greater than the impact of the financial crisis — leading to seven times as much demand destruction, according to the report, which assumes that the lockdown restrictions will be eased in coming months.
“There is still downside risk to our numbers this year, and also next year,” said Mr Birol. “We do not know what the economic recovery will look like.”
Global oil demand would decline by a record 9.3m barrels a day this year, the IEA estimated, while consumption in April alone was 29m barrels a day lower than it was a year ago.
The collapse in demand has caused turmoil in the oil market, with Brent crude prices last week falling to the lowest level in 18 years and the US oil marker West Texas Intermediate dropping into negative territory.
Mr Birol was part of discussions between global producers and G20 nations about how to support oil prices. But the biggest ever production cuts, which are due to take effect from May 1, have so far failed to support an oil market in freefall.
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Meanwhile, coal demand will drop by 8 per cent this year, with natural gas down 5 per cent, according to the new forecast.
Overall electricity consumption will also decline, but renewable power is expected to increase, primarily because of new wind projects coming online in the US. Because renewable power gets priority access to the grid, its share of power production will also rise, and the IEA estimates that low-carbon sources could account for 40 per cent of electricity generation this year.
“The energy industry that emerges from this crisis will be significantly different from the one that came before,” said Mr Birol.
While oil companies’ finances have already taken a massive hit in the first quarter, with vast swaths of production uneconomic, clean energy companies have weathered the crisis much more easily.
“The business plans that are insulated to a degree from market signals, including the renewable electricity projects, will emerge in the best financial position,” Mr Birol added.