Demand for Fossil Fuels Expected to Fall Precipitously

Despite rising fossil fuel prices, expanding oil and gas exports would endanger the stability of the economies in many African nations, according to a recent analysis.

According to a report released on Monday by the think tank Carbon Tracker, the demand for fossil fuels is likely to decline significantly in the medium term.

As a result, the analysis concluded that increasing solar power would be a better long-term bet than relying on gas exports to drive economic growth.

Increasing demand for oil and fuel

(Photo : Zbynek Burival/Unsplash)

Although gas prices are high right now and the top five oil and gas companies have made profits totaling more than $170 billion so far this year, the report predicted that gas revenues would decrease by half by 2040 and that the market would experience record-low prices because of declining demand, as per The Guardian.

If nations pursued a "dash for gas," they would leave Africa with significant investments in gas infrastructure but no export market, the analysis found.

Lead author of the report and senior clean tech analyst at Carbon Tracker Kofi Mbuk forewarned companies investing in fossil fuels in Africa that they would be left with stranded assets.

He declared that the switch from fossil fuels to renewable energy sources was both inevitable and irreversible.

Renewable energy sources are now squeezing out demand for fossil fuels to meet the growth in energy demand on a regional and global scale.

Solar and wind energy present the most promising path for economic development in Africa and other emerging economies.

The Cop27 UN climate summit in Egypt, which is currently in its second week, is focusing heavily on the future of Africa's enormous gas reserves.

Africa's potential as a gas exporter is a hot topic at the conference, despite not being officially on the UN talks' agenda.

The Cop27 host nation, Egypt, as well as nations like Nigeria, Senegal, Mozambique, Congo-Brazzaville, Equatorial Guinea, and Algeria have sizable gas reserves.

A large number of African heads of government who attended the leaders' summit portion of the summit last week were eager to take advantage of the opportunity to negotiate gas deals.

There are more than 600 fossil fuel executives and lobbyists present at the talks.

During the discussions, Macky Sall, president of Senegal, told the Guardian that it was unfair for developed nations to try to persuade African leaders not to drill for gas when the west had become wealthy from fossil fuels.

A number of influential people have also endorsed Africa's use of its gas reserves. Former British Prime Minister Tony Blair told the Guardian that they needed access to gas.

For them, gas will serve as a temporary fuel.

Many people are using wood as fuel, which is bad for their health as well as for the environment. For a transitional period, they will need to develop their gas resources.

The future of African oil and gas

The oil and gas sector in Africa is evolving. The nations that produce oil and gas on the continent are under increasing pressure as the world looks to hasten the transition away from fossil fuels.

According to our analysis, the majority are particularly vulnerable to the global energy transition because their economies are reliant on the sale of oil and gas, and their reserves are, on average, more expensive to produce and have a higher carbon footprint than those of other regions

At the same time, the continent's energy demand is in danger of exceeding the continent's supply. Rapid industrialization and population growth are predicted to drive significant increases in energy demand across the continent over the next 20 years, including for fossil fuels.

According to McKinsey modeling, African energy demand in 2040 may increase by as much as 30% compared to today, versus a 10% increase in global energy demand.

Despite the difficulties that must be overcome as a result of these dynamics, they also offer a clear opportunity for the continent to reflect and reevaluate its approach to energy.

Africa's oil and gas producing nations could both meet the energy needs of their developing populations and firmly establish themselves in a new energy environment if they take measures to establish enabling environments, enhance access to available capital pools, and draw the appropriate skills and capabilities.

Another factor to take into account is the ongoing invasion of Ukraine, which has had profound effects on people, society, and the economy in many different nations and industries.

Our data analysis shows that over the last 12 months, gas prices in Europe have increased by more than three times.

In addition, the European Commission has stated that it will accelerate the use of renewable energy sources and diversify natural gas supplies in order to make Europe independent from Russian fossil fuels before the year 2030.

The demand for oil and gas from the African nations that have the resources and infrastructure to help meet that demand may rise as a result.