Why We Shouldn’t Ridicule Reduced Oil Demand

The IEA recently published “A 10-point plan to reduce oil consumption”, but how realistic is this plan? In the hope that state governments will incorporate the plan into national policy to reduce oil use, it is important to consider the likelihood of states making these changes and the viability of each of the ten points in practice.

The plan came in response to the Russian invasion of Ukraine and the resulting threat to global energy security. Oil and gas prices have been rising steadily to record highs for months, but the Brent Benchmark jumped to $131 per barrel The 8thand March, shocking the industry. In addition, dependence on Russia for oil and gas exports has led to shortages globally, as governments and oil majors explore potential ways to increase production in other parts of the world to bridge the gap.

The plan presents 10 suggestions for using cutting oil: reduce speed limits on motorways by at least 10 km/h; work from home up to three days a week if possible; car-free Sundays in cities; make the use of public transport cheaper and encourage micro-mobility, walking and cycling; alternate private car access to major city roads; increase carpooling and adopt practices to reduce fuel consumption; promote efficient driving for freight trucks and delivery of goods; use high-speed and night trains rather than airplanes whenever possible; avoiding business air travel where other options exist, and; increase the adoption of electric and more efficient vehicles.

As countries seek to increase their oil production To help with the supply crisis, the IEA makes these suggestions to counter the demand side of the problem. The IEA estimates that “full implementation of these measures in advanced economies alone can reduce oil demand by 2.7 million barrels per day over the next four months, compared to current levels.”

But how viable are these recommendations in practice? Well, some countries have already started to adapt to some of these standards and are well on their way to achieving them, although not all 10 points work in all countries. In the UK, London has long been home to an emissions zone, introducing an ‘Ultra Low Emissions Zone’, or ULEZ, in 2019. This means that most traditional fuel vehicles entering the zone must pay a charge, to reduce pollution in the city.

London Mayor Sadiq Khan now intends to expand this area to include the whole city. London aims to achieve net-zero emissions by 2030 and initiatives like this can go a long way towards achieving that. Once established, the ULEZ led to a reduction of 10,000 cars per day on London’s roads, and the expansion is expected to mean a drop of 20,000 to 40,000 more vehicles per day. Currently, six out of 10 households in London do not own a car, thanks to the wide availability of public transport services as well as the difficulty of parking in the city.

Another trend that has already taken off is remote working. During the pandemic, workers around the world have been forced to work from home due to Covid-related movement and gathering restrictions. And countries like Canada are now exploring the possibility of continuing the remote work trend. A 2015 study found that approximately 36% of the Canadian workforce were “potential teleworkers”. If these workers worked from home five days a week, that would mean an 11% reduction in emissions produced by households for transportation, according to Statistics Canada. While the decrease in emissions during Covid was only temporary, it was unprecedented and demonstrates what can be done on the demand side.

Meanwhile, the C40 organization – a network of mayors from nearly 100 cities around the world – has long insisted on the need to increase public transport coverage. At the end of 2021, he announced that public transport use was to double in C40 cities over the next decade, at the cost of $208 billion per year, to support the goal of limiting global warming to 1.5°C. and achieve international climate change goals. Currently, transport contributes about a quarter of total global carbon emissions.

The European electric vehicle (EV) market has grown exponentially during the pandemic, with a 143 percent increase in sales in 2020 compared to 2019. In Asia-Pacific, the electric vehicle market is expected to grow at a CAGR of 33.1% between 2021 and 2028, reaching $1,927.04 billion by 2028. And other unexpected areas also welcome electric passenger vehicles. Some sub-Saharan African governments have already announced electrification targets, aimed at reducing the 10% of Africa’s total greenhouse gas (GHG) emissions created by transport. As the region’s automotive market is expected to grow from 25 million vehicles today to around 58 million by 2040electrification will be vital to reducing carbon emissions.

Based on the current changes already underway in several cities around the world, the IEA’s goals seem relatively realistic. However, very few cities are currently making all of these changes at once, meaning the reduction in oil consumption is minimal. Cities would have to make drastic changes across multiple industries to achieve the kind of reductions outlined in the IEA’s plan. While the estimated 2.7 million bpd reduction in oil demand over the next four months may seem like an illusion, the effect of these relatively small changes in the world could have a significant effect.

By Felicity Bradstock for Oilprice.com

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