Oil demand is under increasing threat from electric cars and cleaner fuels

International Energy Agency sees crunch on oil consumption

In order to significantly reduce harmful pollution by 2040, electrification will have to form part of a comprehensive package of policies to reduce power sector carbon emissions and improve energy efficiency, the Paris-based body that advises nations on energy policy said.

The IEA has gone so far as to state that changes to the power mix will need to be addressed with "growing urgency" across the global, which will, in turn, require market reforms, more significant investments in national grids and more prolific adoption of demand-side response, smart metering and energy storage technologies.

The IEA adds electricity markets are undergoing a "unique transformation" with higher demand brought by the digital economy, electric vehicles (EVs) and other technological change.

Cumulatively, this is a downward revision of 8.3% in just two years, a downgrade equivalent to three times Australia's entire export volumes in 2017.

A report by the United States -US-based International Energy Agency (IEA) has warned of potential upheavals in the global crude oil market between this year and 2020.

Under current and planned policies, energy demand is set to grow by more than 25% to 2040, requiring more than $2 trillion (£1.5tn) a year of investment in new energy supply.

"Without such a pick-up in investment, USA shale production, which has already been expanding at record pace, would have to add more than 10 million bpd from today to 2025, the equivalent of adding another Russian Federation to global supply in seven years - which would be an historically unprecedented feat".

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The oil market has turned very volatile in recent months, with US President Donald Trump pressing OPEC - and especially cartel kingpin Saudi Arabia - to increase output so as to offset reduced supply from Iran following the reintroduction of tough US sanctions.

"Our analysis shows that over 70% of global energy investments will be government-driven and as such the message is clear - the world's energy destiny lies with government decisions", said Dr Fatih Birol, the IEA's Executive Director.

In the Sustainable Development Scenario, where governments take active policy measures to tackle climate change in line with Paris Climate change agreements, global oil demand peaks around 2020 and in almost every country by 2030.

While the increase in renewable energy should benefit the environment, it will nonetheless also pose a challenge, not least because such sources depend on the availability of sun or wind. This takes legislation and policies to decrease emissions and limit climate change into consideration, and also assume further energy efficiencies in the use of fuel, buildings, etc.

According to the IEA, coal now makes up a third of all energy consumed worldwide and plays an essential role in iron and steel industries. Many of those are in Asia, where average coal plants are on average 11 years old with decades left to operate, compared with an average age of 40 years in the United States and Europe.

However, IEA said the level of conventional crude oil resources approved for development is in line with the needs of the Sustainable Development Scenario, but that this would meet only half of the level needed to meet demand growth in the New Policies Scenario. Electricity will account for a quarter of energy used by end users such as consumers and industry by 2040, it said.

He added: "To be successful, this will need an unprecedented global political and economic effort".

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