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21 April 2022

Why fossil fuel demand is set to plummet

The war in Ukraine and Covid-19 will dramatically reduce how much oil and gas we consume over the next decade.

By Nick Ferris

In the past two years the global energy system has been hit by two major crises. First, fossil fuel demand fell by 6 per cent in 2020 as countries locked down during the Covid-19 pandemic, and international travel was halted. Big oil companies recorded multi-billion dollar losses and US oil prices went into decline for the first time as supply vastly exceeded the suddenly fallen demand.

Russia’s invasion of Ukraine then made energy security a pressing issue — Russia being the world’s largest exporter of fossil fuels and responsible for 15 per cent of energy trade. Countries are rushing to wean themselves off Russian fossil fuels by increasing renewable capacity and energy efficiency.

In the next decade these two shocks combined should dramatically lower oil and gas consumption, according to researchers from the American climate think tank RMI.

The war in Ukraine in particular has brought forward a “tipping point” in renewables taking over the energy system, say the researchers, as Europe realises it cannot justify buying hundreds of millions of euros of gas from Russia a day. This is leading countries to accelerate the adoption of cheap renewable electricity, the price of which has fallen 90 per cent over the last decade.

“Until now, climate perils and economic logic could not by themselves fully overcome incumbents’ blockade and politicians’ hesitancy,” say the researchers. “Now energy security adds a powerful motivator that could make all the difference.”

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