Global demand for fossil fuels will peak before the end of this decade as individual countries move toward alternative sources of energy, according to a new report by the International Energy Agency.
IEA’s analysis shows “the momentum behind clean energy transitions is now sufficient for global demand for coal, oil and natural gas to all reach a high point before 2030.”
The report says the share of coal, oil, and natural gas in global energy supply, stuck for decades around 80%, will start to edge downward and reach 73% by 2030.
This change comes as investments in green energy have risen 40% since 2020. To drive home the point, the data shows 1 in every 25 cars sold in 2020 was electric. This year 1 in every 5 is an electric vehicle.
Individual countries are contributing to the push toward greener economies. The IEA analysis calculates 50% of new US car registrations will be electric in 2030 because of the Inflation Reduction Act, which provides tax incentives and subsidies for everything from wind farms to EV purchases.
China, the world’s largest energy consumer, is also heavily investing in green initiatives. Solar adoption in China, for example, is greater than in any other country.
The study also notes China’s GDP growth is expected to average just below 4% annually to 2030, a slowdown from prior years. Over the past decade, China accounted for almost two-thirds of increase in global oil consumption and nearly one-third of the rise in natural gas.
“Momentum behind China’s economic growth is ebbing and there is greater downside potential for fossil fuel demand if it slows further,” reads the study. “This results in its total energy demand peaking around the middle of this decade, with robust expansion of clean energy putting overall fossil fuel demand and emissions into decline.”
The challenges facing the clean energy transition include supply chain issues and higher-than-expected costs. Higher interest rates are also impacting the sector because green projects are capital intensive.
Renewable stocks have taken an outsized market beating this year as investors bet that going green will take longer and require more money in a higher-for-longer rate environment.
Meanwhile recent deals in the oil industry show that big oil companies are still betting on crude demand amid the energy transition.
This week, Chevron (CVX) announced plans to acquire crude and natural gas explorer Hess (HES) in an all-stock deal valued at $53 billion, or $171 per share.
The merger comes more than a week after ExxonMobil (XOM) announced it would acquire Pioneer Natural Resources in a deal valued at $60 billion.
“Everybody realizes there’s going to be an energy transition,” Wells Fargo senior energy analyst Roger Read recently told Yahoo Finance, “But it’s going to be a lot longer. It’s going to be a lot tougher. It’s going to be a lot more expensive.”
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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