Oil and gas will continue to be cornerstone of world energy

"The unavoidable conclusion is that there is an urgent need for immediate radical reductions in energy sector CO2 (carbon dioxide) emissions if there is to be any chance of achieving the 1.5 degree Celsius goal", the IEA said in its World Energy Outlook 2016.

[Native Advertisement] "We see clear winners for the next 25 years - natural gas but especially wind and solar - replacing the champion of the previous 25 years, coal". "But there is no single story about the future of global energy; in practice, government policies will determine where to go from here".

It could happen sooner, but that would require Trump to really embrace the kind of transformation of the energy sector called for by the Paris Accord on climate change-promoting renewables, encouraging energy efficiency, and migrating the transport sector to electric motors.

From 2020, the European Union will impose much tougher legislation to control vehicle emissions, which many expect to quickly erode use of traditional fuels such as gasoline and diesel, a major source of oil demand.

The IEA forecast that almost 60 percent of all new power generation capacity up to 2040 would come from renewables.

Growth in oil consumption is forecast in the annual World Energy Outlook unveiled in London to slow but still reaches 103.5 million barrels a day (bpd) by 2040.

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"Without a pickup in investment, or a slowdown in demand, the stage may be being set for the next boom and bust cycle for oil". "But there is a threat on the horizon to the "baseload" of oil output, the conventional projects that operate on a different rhythm, with lead times of three to six years from investment decision to first oil".

Oil markets are faced with the rising threat of an oil shortage emerging over the next few years, the IEA has warned.

Now, little more than a week after the Paris agreement came into force, the IEA's analysis suggests that the only hope for Australia's coal mines is if the world ignores that global pact. "This shift is catalyzed by the increasing availability of footloose US LNG cargoes and the arrival in the 2020s of other new exporters, notably in East Africa, as well as the diversity brought to global supply by the continued, if uneven, spread of the unconventional gas revolution", the IEA says. But meeting more ambitious climate goals will be extremely challenging and require a step change in the pace of decarbonisation and efficiency. Its central, or "New Policies", scenario assumes signatory countries will attempt to meet the requirements set by Paris, as well as existing environmental legislation, while its "450 scenario" assumes signatories will adhere to the agreement and oil demand will fall off sharply and the "current policies" scenario does not factor in the Paris deal. Natural gas continues to expand its role, while the shares of coal and oil fall back.

"The lesson for governments and investors is simple: those who exit fossil fuels and embrace solar and wind will reap financial rewards and avoid stranded assets".

More information about the WEO is available here.

This is in part because even though renewable energy sources are finding their way into electricity generation, oil is still an important source of power for transportation and petrochemical production.

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