By: Dwight Links
A report on trends in oil and gas demand and the nations producing them has forecast that alternative energy sources will impact demand and prices in coming decades.
Titled ‘Lead Report: Policy Dialogue on Just Energy Transition 2.0,’ the report states that many forecasters are anticipating the coming decades to be the height of fossil fuel industries around the world, with the impact of alternative energy sources playing their part in affecting prices, demand, technological developments.
“According to most energy forecasters, oil and gas demand is set to peak in the coming years even without governments adopting new policies. This is being driven by technological advances and cost reductions in alternatives to oil and gas, especially electric vehicles, as well as wind and solar power,” the report explains.
This drive in energy transition developments comes as a result of governments and industries seeing the potential of these alternatives.
“Clean alternatives to oil and gas are increasingly able to align energy security, affordability and environmental sustainability objectives, especially in importer countries. Policies aiming to jointly achieve these goals will bolster the transition, accelerating the decrease in oil and gas demand,” the report adds.
The non-profit Climate Strategies partnered with Salzburg Global, the Stanley Centre for Peace & Security, and the Windward Fund to compile the report based on the inputs from policymakers, researchers and practitioners from the oil and gas sectors.
TRENDS TO COME
According to the report, the world will see the highest price point and decline, along with the highest demand point and its decline up to 2100.
“A peak and decline in demand will push down oil and gas prices. This can have a profound
impact on economies that depend on oil and gas exports, including stresses on fiscal budgets, balance of payments difficulties, loss of access to foreign exchange and macroeconomic shocks,” the report states in terms of the pressures expected to manifest in coming periods.
Focusing on the impact it will have on countries rarely using these resources, this presents a worrying picture of declining revenues and the prospect of an energy resource becoming redundant. Some of the insights provided by the author of the report, Greg Muttitt, outline that the picture impacts importers and exporters alike.
“About 20 countries rely on oil and gas for more than 20% of their fiscal revenues; for about 10 countries, it represents more than half. While exporters have experienced the difficulties of previous price downturns, this time the effect is long-term and systemic,” Muttitt states.
“Oil and gas exporters urgently need to diversify their economies, reducing their reliance on oil and gas and building resilience. This entails both building new sectors to create a broader economic base, and diversifying their sources of fiscal revenue,” Muttitt adds, as the picture for these economies become more uncertain in relation to their reliance on sales and imports.
Climate Strategies echoed these sentiments by reiterating the importance of economic diversification becoming a key goal for these economies.
“It can take decades, hence it is important to start concerted efforts now, to stay ahead of the global energy transition,” the organisation explained.
TRANSITIONING IMPACT
According to Muttitt, countries in the oil and gas market are facing a dilemma on how best to implement their adaptation strategies and still extract the last revenues from the resources.
“The energy transition poses a serious dilemma for new and prospective oil and gas producers. It commonly takes over ten years for new oil and gas fields to be developed, and even longer for a government to start to see meaningful revenues. Given that the global energy transition is expected to take place over the next two to three decades, demand may already have diminished and prices dropped before new producers ever see significant revenues,” Muttitt adds.
Transitioning away from dependence on oil and gas creates an opportunity for a more
prosperous economy, and the report supports this important move by stating that: “Balanced economies tend to grow faster, are more resilient to changes in international markets, and enable consistent development rather than boom/bust cycles.”
According to the Industrial Baseline Survey report of 2024 commissioned by the former Ministry of Mines & Energy, and compiled by the audit firm Deloitte Namibia, it indicated that the earliest instance of oil extraction in Namibia is anticipated for only after 2030.
