A longer pandemic may usher in the slowest decade of energy demand in a century and the global response to the coronavirus can reshape the energy landscape for years to come, the International Energy Agency said in its latest report.
The Paris-based agency warned of a fragile recovery for oil markets reeling from the economic impact of the pandemic and urged countries to pursue a transition to green cleaner forms of energy.
“The Covid-19 crisis has caused more disruption than any other event in recent history, leaving scars that will last for years to come,” the IEA said
“Covid-19 unleashed a crisis of exceptional ferocity on countries around the world ... the crisis is still unfolding today — and its consequences for the world’s energy future remain highly uncertain.”
Global energy demand is expected to decline 5 per cent this year with carbon dioxide emissions plunging 7 per cent. IEA also forecast energy investments to shrink 18 per cent.
Oil demand, which has been battered by the coronavirus pandemic, is expected to collapse 8 per cent, with a 7 per cent decline in use of polluting coal.
Gas, a cleaner form of energy, is expected to decline 3 per cent, while global electricity demand is set to soften 2 per cent.
"The slower pace of energy demand growth puts downward pressure on oil and gas prices compared with pre-crisis trajectories, although the large falls in investment in 2020 also increase the possibility of future market volatility," the IEA said.
The agency explored a number of scenarios for the control of the pandemic.
A "prolonged pandemic" would result in lasting damage to economic prospects. In the delayed recovery scenario, the Paris-based agency expects global economic recovery to return to pre-crisis levels only by 2023 with the pandemic ushering in a decade of the lowest rate of energy demand since the 1930s.
A more sustainable case scenario would see "a surge in energy policies and investment" that will help place the energy system on track to achieve sustainable targets, including those within the Paris Agreement.
A longer-term view sees net zero emissions by 2050, on the back of growing commitments by companies and countries to reach such targets.
The IEA echoed Opec in suggesting a rebound in global energy demand to pre-crisis levels by early 2023.
Future demand growth scenario will hinge on developing economies to fuel growth.
"With demand in advanced economies on a declining trend, all of the increase comes from emerging market and developing economies, led by India," the agency noted.
India follows the US with the world's second highest number of infections with over 7 million people contracting Covid. Asia's third-largest economy has seen a slump in demand for energy due to mobility restrictions, particularly in aviation that were put in place in March to contain the pandemic.
Last week, Opec forecasted in its annual outlook, global oil demand to rebound higher than before the pandemic, reaching 103.7 million barrels per day by 2025, as countries accelerate efforts to revive economies.