An oil crunch is looming on the horizon in the absence of government intervention and unprecedented output increases, the IEA said. One scenario anticipates peak oil in 2040.
Global demand for oil will continue to increase until 2040, the International Energy Agency (IEA) said Tuesday, but peak oil could be reached around 2020 if there were serious government interventions to address climate change.
Without major government policy interventions and investment in oil supplies, there is likely to be a supply crunch in coming years.
Oil demand is expected to increase to 106 million barrels per day (mbd) by 2040, 11 mbd more than today, according to the IEA's flagship publication World Energy Outlook 2018.
Demand will be driven by developing economies led by China and India, although this may be offset by more advanced economies reducing consumption up to 2040 due to the increasing use of renewables and implementation of other efficiencies, as well as more electric cars on the road.
Still, oil consumption will continue to grow in coming decades, due to rising petrochemicals, trucking and aviation demand.
The forecasts were part of a New Policies Scenario, which takes into account faster economic growth and changes to fuel efficiency policies in the United States.
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 nearly every country by 2030.
This requires that by 2040 gas and diesel vehicles are 40 percent more efficient today, half the world's car fleet becomes electric, a quarter of buses are electric and a fifth of truck fuels are low or zero carbon.
"There are also major changes in most other sectors and as a result, total oil demand in 2040 in this scenario is 25 mbd lower than today," IAE said. "On the supply side, lower demand and prices mean that production levels are down across the board."
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.
The United States, already the world's top oil producer due to its shale revolution, is projected to lead new oil production up to 2025, accounting for 75 percent of increases. However, after 2025 shale oil starts to decline and OPEC members would have to produce more.
"But meeting this growth in the near term means that approvals of conventional oil projects need to double from their current low levels. Without such a pick-up in investment, US shale production, which has already been expanding at record pace, would have to add more than 10 million barrels a day from today to 2025, the equivalent of adding another Russia to global supply in seven years – which would be an historically unprecedented feat," the IEA said.