Oil demand expected to rise

Despite the focus on renewables and electrification of building systems and vehicles, demand for oil is expected to rise this decade, says RBC in its latest though leadership report: The New Climate Bargain: How Canada Can Manage Energy & Environmental Security.

“While renewable energy consumption is forecast to lead growth with a 3.2 per cent annual increase between 2020 and 2050, oil demand is expected to rise by 0.5 per cent and natural gas by 1.3 per cent annually,” states the report that was co-authored by Colin Guldimann and Yadullah Hussain and their team from RBC. “Absent greater action, rising investment in clean energy doesn’t necessarily mean a decline in traditional energy sources.”

The report outlines several of the contributing factors to the rise in demand, explaining the trend through both a global and a domestic lens.

For example, the report illustrates the market dominance that internal combustion engines have in Canada. Although the sale of zero-emission vehicles (ZEV) is on the rise in Canada, they accounted for less than six per cent of Canadian light vehicle registrations in 2021. Furthermore, states the study, even if the mandate requiring 60 per cent of new light-duty vehicle sales to be ZEVs by 2030 is reached, almost 85 per cent of light vehicles on the road would still use gasoline.

Compounding the challenge is consumer behaviour. The report suggests that preference takes precedence over climate considerations for most Canadians as SUVs continue to account for almost half of car sales, and account for roughly 120 million tonnes of CO₂ emissions annually.

(Source: Enbridge)

What The expected increase in demand for fossil fuels in Canada amounts to on the infrastructure side, say the authors, is additional interest in pipelines and a push for more oil production.

Canada’s Oil and gas sector accounts for about 10 per cent of Canadian GDP, directly employs 178,500 Canadians, and supported 415,000 indirect jobs in 2020.

thoughtleadership.rbc.com