The IEA predicts a decline in demand for all types of fuel until 2030

The slowdown in the growth rate of the Chinese economy will determine the dynamics of energy markets in the coming years, according to the forecast of the International Energy Agency (IEA) until 2030. The industrialization of the country and the active construction of infrastructure supported demand in energy-intensive sectors, but the opportunities for continuing active construction are limited; fuel consumption will be affected by an increase in the share of electric vehicles and a sharp increase in gas liquefaction capacity in 2025–2027 – the latter may become a limitation for the reorientation of Russian gas supplies to Asia.

The slowdown in the Chinese economy will have a significant impact on energy markets, according to the International Energy Agency’s 2030 forecast. By this point, in the organization’s baseline scenario, demand for all fossil fuels will have peaked and begun to decline—the first time the IEA has made such a forecast. The decline in demand will be a consequence of lower growth rates and the energy crisis of 2022.

Over the past ten years, China has accounted for more than a third of global economic growth, as well as two-thirds of global oil consumption growth and a third of global gas consumption growth. But now the economy is slowing: growth will be no more than 4% per year by 2030 (last year’s forecast was higher at 4.5%), so the country’s overall energy demand will peak around 2025, following increased use “clean” energy is expected at the IEA. A decrease in medium-term growth rates by another percentage point will lead to a decrease in oil imports by 5% and LNG by 20%.

The decrease in demand for fuel will be a consequence of the Chinese economy approaching an “inflection point” – the possibilities for further infrastructure construction are limited, and in China, in terms of square meters per person, the same amount of housing has already been built as, for example, in Japan. Infrastructure saturation means lower future demand in many energy-intensive sectors such as cement and steel. But so far the crisis in the Chinese real estate market is only affecting new projects. The industrialization of China supported the demand for coal for steel production, but now the share of smelting from coal is declining, including due to substitution by other technologies. In developed countries, demand for coal peaked in 2007; in China it could be reached by the middle of the decade. In other developing countries, consumption growth will continue, but it will not be able to change the overall trend.

Demand for oil has grown in recent decades primarily due to transport (over 20 years it has increased by 18 million b/d and is now about 100 million b/d; the transport sector provides 45% of oil consumption). But this year, the share of electric vehicle sales is expected to reach 18%, driven largely by China (accounting for half of sales) and developed countries. By the end of the decade, transport will cease to be a source of growth in oil consumption, the IEA expects. In petrochemicals, air transportation and sea freight, demand will continue to grow, as in other developing countries.

New projects for the production of liquefied gas can cause a blow to the market for pipeline gas supplies; the peak of their commissioning will be in 2025–2027. The IEA’s baseline scenario envisages that by 2030 this will increase LNG supplies by 250 billion cubic meters per year (this is almost half of the current supply volume), 60% of the new capacity will appear in the United States and Qatar. At the same time, a decrease in consumption in Europe and the construction of the necessary infrastructure in developing countries not keeping pace with the growth in supply could lead to an excess of LNG on the market and additional pressure on prices. The same factor may become the main obstacle to the reorientation of Russian gas supplies to Asia – in the IEA’s baseline scenario, the share of Russian supplies in global supply decreases from 30% in 2021 to 15%.

So far, Russian energy supplies to China are growing. In particular, oil supplies in September, according to the IEA, increased by 270 thousand b/d, the total export of oil and petroleum products amounted to 2.4 million b/d, which is almost a third of Russian exports.

Tatiana Edovina