IEA, oil demand and aviation growth – sector not on track on lowering CO2 emissions
The International Energy Agency (IEA) says that global oil demand is rising slowly, since the end of Covid restrictions, but is set for a huge boost from resumed air travel and China’s economic reopening after its Covid measures. It said “Rebounding jet fuel use and a resurgent China will see an overall 1Q-4Q ramp-up of 3.2 million barrels per day (bpd), the largest relative in-year increase since 2010.” It said that Chinese air travel has increased, with its domestic flights now well above pre-pandemic levels. IEA said “New aircraft are up to 20% more efficient than the models they replace, but this has been insufficient to keep up with growing activity. Between 2000 and 2010 fuel efficiency improved by 2.4% per annum, and by 1.9% from 2010 to 2019, demonstrating that additional incremental improvements are becoming more difficult. Meanwhile passenger demand grew at over 5% per year from 2000 to 2019, meaning that annual improvements are far below what is needed to align with the Net Zero Scenarios.”
China, air travel rebound set to supercharge oil demand -IEA
By Noah Browning (Reuters)
15th March 2023
LONDON – Global oil demand is edging up slowly but is set for a huge boost from resumed air travel and China’s economic reopening after COVID-19 curbs, the International Energy Agency said on Wednesday.
“Global oil demand growth started 2023 with a whimper but is projected to end the year with a bang,” the Paris-based agency said in its monthly oil report.
“Rebounding jet fuel use and a resurgent China will see an overall 1Q-4Q ramp-up of 3.2 million barrels per day (bpd), the largest relative in-year increase since 2010.”
The agency kept its forecasts for Chinese and global demand relatively steady from the previous month, at 16 million bpd and 102 million bpd, respectively.
Oil supply is still outstripping relatively slow demand, the IEA added, but the market is set to balance by around the middle of the year with China and developing countries driving demand.
“Real-time indicators for Chinese mobility mostly stabilised after January’s remarkable bounce, led by air traffic with domestic flights now well above pre-pandemic levels,” the IEA said.
High inflation and investor concerns over high interest rates cloud the economic horizon and could pose a risk to fuel demand, the IEA warned, adding that concerns over the health of the U.S. banking sector also carried potential downside risks.
Meanwhile commercial oil stocks in the developed countries of the OECD reached an 18-month high as demand ebbed and Europe ramped up storage ahead of bans on some Russian crude and refined products imports.
Russian oil production stayed near pre-war levels in February despite sanctions on its seaborne exports.
Still, crude exports fell 500,000 bpd while a new European Union ban on its seaborne products and a U.S.-led international price cap – both starting on Feb. 5 – cut Russian products exports by 650,000 bpd.
Aviation – subsector, not on track
Passenger demand recovered gradually in 2021, with domestic traffic at 68% of 2019 levels and international traffic at just 28%. This represents an overall increase of 28% versus 2020, with traffic not expected to fully recover until the end of 2023. Air cargo, however, showed stronger growth in 2021, rising by nearly 7% above the pre-pandemic peak.
Post pandemic, the International Civil Aviation Organisation (ICAO) revised their projected annual growth to 2050 from 4.2% to 3.6%. Within the Net Zero Scenario a shift to high-speed rail, reducing business flights and a frequent flyer levy are used to reduce demand growth.
More recently, Russia’s invasion of Ukraine has dealt multiple blows to aviation through increased oil prices, modified flight routes, economic sanctions and repossession or writing off of aircraft leased to Russian airlines.
New aircraft are up to 20% more efficient than the models they replace, but this has been insufficient to keep up with growing activity. Between 2000 and 2010 fuel efficiency improved by 2.4% per annum, and by 1.9% from 2010 to 2019, demonstrating that additional incremental improvements are becoming more difficult. Meanwhile passenger demand grew at over 5% per year from 2000 to 2019, meaning that annual improvements are far below what is needed to align with the Net Zero Scenarios.
The commercial sale of sustainable aviation fuels (SAF) is subject to blending limits, but with 100% SAF flights completed and further trials ongoing, the sale of 100% SAF is expected soon. Increasing SAF use from less than 0.1% of all aviation fuels in 2021 to around 10% by 2030 in line with the Net Zero Scenario will require investment in production capacity and new policies such as fuel taxes, low-carbon fuel standards and mandatory blending.
Proposed EU legislation excludes purpose-grown crops from SAF due to sustainability concerns, and while cheaper and more mature, volumes of SAF from wastes are limited. Renewable synthetic kerosene is relatively far from commercialisation, with cost driven by the sources of CO2 and green hydrogen, but it is also highly scalable and has a far superior carbon balance than biofuels.
Incremental improvements to engines, aerodynamics and mild hybridisation can and should be implemented. However, “revolutionary” designs, such as new airframe configurations to enable further efficiency improvements, and electrified or hydrogen-powered aircraft, are needed to enable the significant CO2 emission reductions that could be realised in short- to medium-range operations by switching to alternatives to jet kerosene fuel.
[Then it continues, about hydrogen and other tech …]
A growing number of regulatory frameworks, including Brazil’s RENOVABIO (certificate trading), California’s Low Carbon Fuel Standard (based on carbon intensity), and the European Union’s proposed ReFuelEU Aviation (a blending mandate), include incentives for SAF alongside the United States’ proposed SAF Grand Challenge.
Further, ReFuelEU includes a proposed obligation on aviation fuel suppliers to blend a minimum share of SAF into fossil jet kerosene, 2% from 2025, reaching 63% in 2050. The proposed regulation includes sub-targets for synthetic jet kerosene, which increase from 0.7% in 2030 to 28% in 2050. Individual countries, like Norway (30% SAF blending) and Sweden (27% greenhouse gas reduction), have introduced more ambitious mandates by 2030 (though in the case of Sweden, the ReFuelEU target may override the national mandate). The European Union already regulates intra-EU flights through its carbon emissions trading system. The introduction of a kerosene tax or bringing forward the date when airlines stop receiving free CO2 credits would substantially strengthen it.
The ICAO Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), requires airlines to offset CO2 emissions growth above average pre-pandemic levels, covering all non-exempt international flights from 2027. ICAO approved six offset programmes for CORSIA compliance during the pilot phase, and the programme success will largely depend on the quality of these offsets, which are currently cheaper than SAFs, which can also be used to comply with CORSIA .
In 2021 IATA (International Air Transport Association) member airlines articulated a commitment to achieve net zero CO2 emissions form aviation by 2050, calling on ICAO to endorse their commitment. A representative body of around 290 airlines covering 83% of global air traffic, IATA aims to abate nearly 1.5 Gt of CO2 emissions from SAF (65%), new propulsion technologies (13%), and more efficient operations and infrastructure (3%). Residual emissions of about 300 Mt CO2 are to be dealt with using carbon capture and storage as well as offsets.
The Air Transport Action Group (ATAG), a coalition of aviation industry experts that consists of representatives from a wide range of industries related to aviation, has also laid out a pathway to net zero emissions by 2050 in their Waypoint 2050 report. Following the publication of two important roadmaps, Waypoint 2050 and Destination 2050 by the European industry, ICAO is expected to deliver a long-term aspirational goal at its 41st Assembly later this year in line with the Paris Agreement.
and it continues ….