Rystad Energy predicts slower-than-expected low-carbon transition

Oil demand will continue to grow in the medium term, according to Rystad Energy, due to the insufficient development of low-carbon alternatives and their limited economic competitiveness.
The future of oil demand: an energy transition more complex than expected.

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Rystad Energy’s latest study reveals that the transition to low-carbon alternatives will take longer than expected for the 13 oil-dependent sectors. These sectors, from transport to industry, are showing increasing complexity in their transition, reinforcing the idea that oil demand will remain strong in the years to come. According to the “Oil Macro Scenarios” report, current technological challenges and policy frameworks do not yet allow us to effectively replace oil. Demand for oil is therefore set to continue growing until significant breakthroughs are made in alternative energy technologies.

Transport, a key sector

Around a quarter of the world’s oil demand comes from road passenger transport. EV adoption, while growing, faced obstacles in 2022, with only 19% of global EV sales. Factors such as insufficient charging infrastructure and low consumer acceptance are holding back this transition. The heavy road haulage and marine industries share similar challenges. Current alternatives such as batteries and alternative fuels are not yet sufficiently developed to compete with oil in terms of energy density and cost.

Industry and petrochemicals

Industrial sectors, including petrochemicals, account for 42.3% of global oil demand. Demand for plastics, fuelled by an expanding global middle class, will continue to grow, necessitating increased investment in mechanical and chemical recycling. Other energy-intensive industrial sectors, such as steel and cement production, will also find it hard to replace oil in the near future. Although hydrogen is seen as a viable alternative, its high cost and underdeveloped supply chain limit its rapid adoption.

Emissions reduction outlook

Despite rising demand for oil, it is still possible to reduce global emissions in the medium term. The rapid deployment of clean technologies and renewable energy sources, notably solar photovoltaics, can offset some of this demand. The rapid substitution of solar power for coal in electricity generation has already shown positive results. To achieve a rapid reduction in emissions, accelerated investment in clean technologies and renewable energies is essential. This will require a thorough understanding of the global energy system and concerted efforts to deploy these technologies on a large scale.

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