OPEC cuts long-term forecast for oil demand growth
OPEC says the lockdown-induced economic recession has produced the sharpest downturn in energy and oil demand in living memory
The Organisation of the Petroleum Exporting Countries (OPEC) says it has revised its forecast for global oil demand growth over the long term downward, given that the industry has faced an “existential threat” this year following the coronavirus pandemic and as climate policies continue to shape the future of energy.
In its World Oil Outlook, OPEC outlines its medium-to-long-term expectations for the global economy, oil and energy demand and related policy matters. It has also extended its forecast period through to 2045 (this was previously 2040).
OPEC said worldwide oil demand is expected to increase by nearly 10 million barrels per day (b/d) over the long term, rising to 109.3 million b/d in 2040 and 109.1 million b/d in 2045.
It represents a downward revision of over 1 million b/d when compared to the 2040 levels projected in the group’s 2019 outlook, published last November. Global oil demand stood at 99.7 million b/d in 2019.
The big question
“The year 2020 will be remembered primarily for the omnipresence, as well as unprecedented scale and reach, of the COVID-19 pandemic,” the OPEC report says.
“From an energy point of view, the lockdown-induced economic recession has resulted in the sharpest downturn in energy and oil demand in living memory.”
Looking ahead, OPEC says the “big question hanging over energy and oil markets” was the extent to which there would be a longer-term impact on consumer behaviour, and thus energy demand.
Key assumptions
OPEC says it believes oil will remain the largest contributor to the energy mix through to 2045, accounting for more than 27%, followed by gas (roughly 25%) and coal (nearly 20%). These energy sources were also the three largest contributors to the fuel share in 2019.
The contribution from solar, wind and geothermal energy is expected to grow by 6.6% per year on average through to 2045, “significantly” faster than any other energy source.
These renewable energy sources are expected to represent 8.7% of the fuel share in 2045, up from 2.1% in 2019.
The world economy is forecast to more than double in size, with global GDP expected to exceed US$258 trillion in 2045, up from roughly $121 trillion in 2019.
The global population is equally projected to increase by over 1.7 billion to almost 9.5 billion in 2045, OPEC says, up from 7.7. billion in 2019.
Climate imbalance
OPEC, which is comprised of some of the world’s most powerful oil producers, says it anticipates that policy instruments which primarily target objectives of the 2015 Paris Agreement on climate change will “continue to drive a transition to renewable energy sources and a reduction in greenhouse gas (GHG) emissions”.
However, the group adds that “while many countries are notionally signed up to a global, collective effort to combat climate change, the majority of policies relating to energy demand and supply will continue to be set and enforced at the national level, resulting in continued disparity in the scope of policy ambitions among countries and regions”.
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