Contributed by Robert Lyman © 2022. Robert Lyman’s bio can be read here.

In Canada’s Emissions Reduction Plan 2030, a document published by the Canadian federal government in May 2022, the Trudeau government expressed its vision of how the Canadian and global oil and gas markets would evolve.

“The sector faces a major transformation as the world moves away from fossil fuels to address climate change and to enhance energy security. The International Energy Agency forecasts that to limit warming to less than 1.5 degrees C., global oil demand will have to decline from 100 million barrels per day in 2020 to 24 million barrels by 2050.”

Almost a year later, how’s that working out? What do the most recent analyses from the three most authoritative sources say about what happened in 2022 and what it likely to happen in 2013? Those sources are the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) and the Secretariat of the Organization of Petroleum Exporting Countries (OPEC).


The general consensus of the expert sources is that the world oil market is in a tumultuous period due to large and unpredictable changes in the global economy, the competing inflationary and recessionary trends, the residual effects of the COVID-19 pandemic (especially in China), and the geopolitical uncertainties caused by Russia’s invasion of the Ukraine and the sanctions imposed by European countries. One might add to these influences the effects of weather – the winter of 2022-2023 was one of the mildest in recent memory in both Europe and North America, which significantly reduced energy demand. Western governments have implemented costly greenhouse gas emission reduction measures, while the countries of Asia have largely ignored such concerns and focused on economic development.

As has been apparent for many years now, the broad trends in the global energy economy are not being driven by policies or events in Europe and North America but rather by those in Asia. It seems clear that the Canadian government has not “caught on” to this trend.

Oil and Liquids Demand

Table 1 summarizes the estimates of global oil demand in 2022, 2023 and 2024 by source in March 2023.

                     Table 1            

Global Oil Demand Projections (Million Barrels per day)


While the sources differ somewhat in their estimates, all foresee a substantial increase in oil and liquids demand in 2023 that will reach or exceed the previous peak in global demand reached in 2019 before the pandemic. The world is again on a track of seeing annual oil demand increases of at least one million barrels per day, the pattern that was established in the 2011 to 2019 period. Almost all of this growth is projected to occur in the non-OECD countries.

Notably, all three sources view China as the main driver of demand growth in 2023 as the country moves away from its zero-COVID policy, in a shift that will increase travel. The Energy Information Administration sees global GDP growing even faster into 2024 and this driving oil demand higher. (The Biden Administration appears to not have noticed the projections of its own agency.)

Oil and Liquids Supply

Table 2 shows the current projections of global oil and liquids supply.

                Table 2

Global Oil Supply Projections (Million Barrels per day)


While OPEC, in its March 2023 Oil Market Report, did not explicitly state its projections of global oil and liquids supply for 2023, it commented that the main drivers of supply growth in the non-OPEC area are expected to be the US, Brazil, Norway, Canada, Kazakhstan and Guyana, while the decline is expected primarily in Russia.

The Complexity of the Market

Geopolitical conditions are creating great uncertainty, largely due to the efforts of the European Union to reduce purchases of Russian crude oil and refined products. According to the IEA, Russia oil exports fell by 500,000 to 750,000 barrels per day in February, 2023 as the EU embargo on refined oil products came into force. Shipments from Russia to the EU fell to 600,000 barrels per day, compared with more than 4 million barrels per day at the start of 2022. Russian oil export revenues declined to $11.6 billion for the month, down 42% from a year ago.

Much of the diverted oil has been sold at deep discounts to China and India, but an increasing amount is finding its way into oil inventories. In January, 2023 OECD industry oil stocks rose by 54.8 million barrels, four times the five-year average build. Global inventories rose that month to nearly 7.8 billion barrels, their highest level since September 2021. Russia is being forced to cut production.

We thus face the anomalous situation in which, in spite of increases in global oil demand that are close to historic highs, production and inventories are increasing and there are downward pressures on the crude oil and refined products prices. So much for the claims of those who foretold the “peaking” of global oil demand and supply. The US EIA in fact projects the average Brent crude oil spot price to decline from $101 per barrel in 2022 to $83 per barrel in 2023 and $78 per barrel in 2024. That is great news for the world economy and for the fight against inflation, but it will add even more impetus to oil demand growth, especially in Asia.

One can only wonder what the combined effects of lower production, lower sales and lower prices will be on Russia’s oil revenues and its ability to continue financing its war with Ukraine.

What of the Trudeau Government Vision?

Global oil markets are notoriously cyclical and unpredictable, so it is always difficult to discern a long-term trend from events over only a few years. Current oil supply and demand trends are clearly being influenced both by the underlying fundamental of Asia-driven global economic and population growth, the effects of OECD governments’ efforts politically to reduce oil consumption and GHG emissions and the results of Russian aggression. None of what has happened to date, however, offers much support for the thesis that oil demand has entered a period of radical, long-term decline. The market has refused to conform with such predictions. How long will it take before this is recognized?


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