Russia says oil demand may plunge, if carbon neutrality formalized

MOSCOW, Oct 1 (PRIME) – International demand for oil may plummet if the intent of the countries to reach carbon neutrality is formalized, Russia’s Finance Ministry said late on Thursday in a document outlining the main directions of budget, tax, customs, and tariff regulations policies for 2022–2024.

“At the same time, long-term prospects of demand for oil are becoming increasingly more negative. If the announced intent of some countries to reach carbon neutrality until 2050 and of China to reach it until 2060 obtains a legislative status, other countries will follow, and demand for oil will plunge,” the document read.

Some research agencies said that demand for oil in 2050 may amount to 17–24% of the demand in 2019 under the scenarios of a zero net emission of greenhouse gases. The International Energy Agency expects the slump will mean that the oil price will be defined by production costs falling to U.S. $35 per barrel in 2030 and to $25 in 2050.

On the other hand, large international investment funds, including BlackRock, national funds of Sweden and Norway, as well as Goldman Sachs, Deutsche Bank, BNP Paribas, and Societe Generale, are starting to consider climate risks as investment risks. They are beginning to reject financing of production projects in some industries and plan to cut investment in fossil fuels in general, the authority said.

This may lead to a rapid decrease of new geological exploration projects in the shelf zones in the first place. At certain periods of time, these tendencies may form local deficits of oil supply in the world, leading to high volatility of oil prices, the ministry said.

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