The world is undergoing a seismic shift in energy consumption as more countries adopt clean energy technologies and reduce their reliance on fossil fuels. This will significantly impact oil-producing nations like Nigeria, whose economy depends largely on oil revenues.
According to the International Energy Agency (IEA), global oil demand will peak this decade, the first time the agency has made such a prediction. The IEA expects oil consumption to top 102 million barrels daily by the late 2020s and then decline to 97 million barrels by mid-century.
The main drivers of this trend are the growing popularity of electric vehicles (EVs) and the cooling of China’s economy, which has been the largest oil consumer for years. The IEA estimates that EV sales will reach 14 million in 2023, representing 18% of total car sales. By 2030, EVs could account for 35% of global car sales, up from less than 25% in the previous outlook.
China’s oil demand will also weaken over the next few years as its economic growth slows down and its energy efficiency improves. The IEA projects that China’s total oil consumption will decline in the long run after reaching a peak of 15.7 million barrels daily in 2025.
The IEA’s projections are based on existing policies and firm objectives of governments around the world. However, oil demand could plunge even faster if more ambitious actions are taken to limit global warming to 1.5C, as agreed in the Paris Agreement. In this scenario, oil consumption could drop to 77 million barrels a day in 2030 and just under 25 million barrels a day in 2050.
The decline in oil demand will pose a major challenge for oil-exporting countries like Nigeria, which rely heavily on oil revenues for their fiscal and external balances. According to the Nigerian National Petroleum Corporation (NNPC), Nigeria’s crude oil production averaged 1.57 million barrels daily in August 2023, the highest level this year. However, this is still below the country’s OPEC quota of 1.8 million barrels per day, far from its potential capacity of over 2 million barrels per day.
Nigeria’s oil revenues have also been affected by the volatility of global oil prices, which have fluctuated between $50 and $100 per barrel this year due to supply disruptions, geopolitical tensions, and demand uncertainties. In September 2023, Nigeria’s oil earnings surged by more than N273.8 billion ($354.42 million) compared to August, thanks to higher production and prices. However, this may not be sustainable in the long term, as oil prices are expected to moderate in the coming years.
The IEA warns that fossil fuel producers will face increasing competition from clean energy sources, becoming more attractive and affordable for consumers and investors. The agency urges oil-exporting countries to diversify their economies away from reliance on oil revenues and invest in low-carbon technologies and infrastructure.
Some countries have already taken steps to prepare for the energy transition. For example, Saudi Arabia, the world’s largest oil exporter, has launched an ambitious Vision 2030 plan to reduce its dependence on oil and develop new sectors such as tourism, entertainment, and renewable energy. On the other hand, Nigeria has lagged in diversifying its economy and addressing its multiple challenges, such as poverty, insecurity, and corruption.
Nigeria needs to seize the opportunity of the energy transition to transform its economy and society for the better. By embracing clean energy technologies and promoting energy efficiency, Nigeria can reduce its greenhouse gas emissions, improve energy security, and create new jobs and industries. Nigeria can enhance its productivity, competitiveness, and social cohesion by investing in human capital, infrastructure, and governance. By pursuing inclusive and sustainable development, Nigeria can achieve its vision of becoming one of the world’s leading economies by 2050.
Source: Businessday NG
