TOKYO/DUBAI -- To achieve net-zero greenhouse gas emissions by 2050, the U.S. and Europe are cutting back on investment in oil and gas production. But it is unclear whether they can promote the adoption of renewable energy quickly enough to slow the growth in demand for fossil fuels, raising concerns over potential energy shortages.
Natural gas prices have more than tripled in Europe since the start of the year. While rich countries scramble for natural gas, which produces fewer carbon emissions than other fossil fuels, Russia is curtailing exports as it tries to cut its own reliance on coal-fired electricity.
The soaring prices also reflect higher demand for gas-fired power generation in Europe. Unfavorable weather means the continent's wind turbines are generating less electricity. But spiraling prices are unlikely to turn back the clock to heavy use of coal power, given the accelerating trend toward decarbonization.
Even the price of coal, however, is rising in Asia and elsewhere because demand remains strong in emerging economies, even as the opening of new coal mines slows.
Global demand for oil is forecast to fall 76% by 2050 from 2020 levels, while that for natural gas is expected to decline by 56% and coal by 89%, according to a road map for reaching net-zero greenhouse gas emissions announced by the International Energy Agency in May.
But many experts point out that the IEA's projections are theoretical figures aimed at achieving net-zero emissions. "Demand is unlikely to fall much in 2050," said Yoshikazu Kobayashi, senior economist at the Institute of Energy Economics, Japan.
The institute has developed two scenarios for global energy demand. The "standard scenario," which assumes a continuation of previous trends, predicts that primary energy demand in rich countries will drop 11% by 2050 from current levels, while demand will rise by more than 50% in emerging economies. As a result, the institute estimates global demand for oil will grow 36%, while that for natural gas will climb 57% by 2050, versus 2020 levels.
The other scenario, which takes advances in decarbonization technology into account, also foresees higher energy demand -- rising 8% for oil and 16% for natural gas. Demand in emerging countries will stay solid for oil for use as gasoline and for natural gas as an industrial fuel, the institute says.
Despite the expected rise in demand for fossil fuels, U.S. and European oil majors are cutting investment in oil and gas fields. Decarbonization has become a top priority as shareholders become more sensitive to the climate change issue. European researcher Rystad Energy forecasts that the top six U.S. and European oil companies' combined exploration and development spending will decline by more than half to $56.8 billion in 2021 from more than $120 billion in 2015.
Global crude oil production will drop 21% and 73% by 2030 and 2050, respectively, from 2020 if natural gas drillers immediately halt investment, according to the IEA's forecast assuming net-zero emissions. If countries lag in their decarbonization efforts, the supply of fossil fuels may not keep up with demand.
The energy-rich producers of the Middle East are aware of this possibility -- and looking to take advantage. Saudi Aramco CEO Amin Nasser said in August that the Saudi state-owned oil company is "diligently working" to expand production capacity. "Seeing that there is a lot of underinvestment in [oil] supply, it's a great opportunity for us," he said.
But Ellen Wald of the Atlantic Council, a U.S. think tank, warns that the world will be exposed to "a huge risk." If the U.S. continuously reduces oil production, "you will be left with oil coming from few countries, such as the UAE, Saudi Arabia and Russia. Not only is that a political threat, it is an economic threat," she said.
If a single region becomes the main source of supply, the risk of a repeat of the oil shocks of the 1970s will also increase.
As extreme weather brought on by global warming inflicts serious damage around the world, including floods, droughts and wildfires, carbon neutrality is a challenge the world must meet in order to limit temperature rises and the risk of still greater harm. The difficulty will be avoiding a breakdown in energy supply while still facilitating the development of the technologies needed for decarbonization.