OPEC projects global oil demand to peak around 2040, as pandemic lowers growth
OPEC has for the first time forecast the peak in global demand, estimating that the world’s thirst for oil will stop growing in about 20 years.
With the coronavirus pandemic prompting a re-examination of the oil market and countries becoming more aggressive on their sustainability targets, OPEC on Oct. 8 estimated that global demand would hit 109.3 million b/d in 2040 before declining to 109.1 million b/d in 2045 and plateauing “over a relatively long period.”
The figures are contained in OPEC’s latest World Oil Outlook, the bloc’s energy market roadmap for the coming decades.
While OPEC has long maintained — and continues to do so in the 2020 report — that oil will be a critical fuel for a long while yet, planting the flag on peak demand underscores the competitive pressures the industry faces as the market shrinks.
“With a longer perspective, we…see the growing importance of renewables and natural gas in meeting future demand,” OPEC Secretary General Mohammed Barkindo said in the forward of the outlook. “Nonetheless, oil will continue to account for the largest share of the energy mix by 2045, providing a stable foundation for addressing global energy needs for years to come.”
The organization has found itself in the crosshairs of environmental activists in recent years, with Barkindo and ministers sometimes lashing out at efforts to ban oil and gas development, which they say ignores the reality of energy demand, driven by population growth and global economic expansion.
The pandemic has dealt a blow to oil demand, and many governments and companies are accelerating their energy transition strategies to account for shifts in mobility and infrastructure.
Aviation, the industry hardest hit by the infection, may not see a full recovery until 2023 or 2024, OPEC said.
Its 2040 estimate of oil demand was a 1.3 million b/d downward revision from last year’s report, which did not contain a 2045 forecast.
The organization, however, said OPEC and the oil industry would remain a crucial provider of affordable energy, especially for the developing world.
OPEC projects that the coronavirus pandemic caused demand to crater to 90.7 million b/d this year, but a “catching up” by the sectors most affected by lockdown restrictions would help a rebound to 103.7 million b/d by 2025.
“Climate and environmental policies will continue to shape the future of energy,” Barkindo said in the report. “Closely linked to climate change is the urgent need to close the energy poverty gap. COVID-19 is a stark reminder of the need to find inclusive and collaborative solutions to these global challenges and to create a more resilient future for humankind.”
OPEC market share
On the supply side, OPEC will have to contend with robust competition through at least 2030, the outlook stated, as even the worst-impaired producers, including the US, recover from the virus setback.
But after 2030, the market landscape improves for OPEC members.
US production is set to peak at 20.3 million b/d in 2030, according to the outlook, a sharp reduction from the 22.8 million b/d expected by 2025 in last year’s report.
Brazil, Norway, Guyana and Kazakhstan will be other drivers of non-OPEC supply growth in the medium term.
From there, OPEC’s low cost of production should allow it to significantly boost is market share, with its total output including condensates, accounting for 43.9 million b/d, or 40% of global supply, by 2045, compared with 35.9 million b/d, or 33%, in 2030.