OPEC sees booming oil demand until middle of century
Cartel raises long-term demand forecasts on rising developing world demand
OPEC called for trillions of dollars worth of investments in the oil industry over the next two decades to meet what it expects to be booming demand for fossil fuels stretching far into the middle of the century.
In an annual report on long-term energy trends, the Organization of the Petroleum Exporting Countries said the oil industry would need investments totaling $12.1 trillion by 2045—$300 billion more than expected last year—to satisfy demand and keep global energy-security concerns at bay.
Demand for oil is set to be stronger than expected in the coming years and remain so over the two-decade time horizon the report considers, as developing nations’ economies and population rates boom, requiring additional investments in new oil production, OPEC said.
As the world prepares for the latest United Nations climate conference in Egypt in November, at which governments are likely to accelerate a move away from fossil fuels, the producers’ group said oil investments had been “needlessly demonized" and warned that “chronic underinvestment" in supplies risked worsening a global energy-security crisis.
“It is crucial we appreciate just what each energy source can provide, as we look to answer the questions related to energy affordability, energy security, and the need to reduce emissions," said Haitham al-Ghais, OPEC’s secretary-general. “All-options, all-solutions and all-technologies must be utilized."
The call highlights the growing divide between the mostly developing nations that produce much of the world’s oil—many of which are OPEC members—and the wealthier Western oil-consuming nations, which are increasingly redesigning their economies away from fossil fuels and toward renewable energy.
The International Energy Agency, a Paris-based group that represents some of the world’s largest energy consuming nations, has said new investments in fossil fuels must be halted if the world is to achieve goals to keep global warming within manageable levels. The burning of fossil fuels releases greenhouse-gas emissions, which almost all scientists blame for driving global warming.
Last week, the IEA said in its own annual report that global demand for fossil fuels could peak as soon as this decade as the energy crisis spurred by Russia’s invasion of Ukraine accelerates a global shift toward greener energy.
In its report Monday, OPEC—which employs teams of economists and analysts to forecast the future of the oil demand on which its members’ economies depend—raised its projections for oil demand across the length of the 20-year horizon it considers.
In the coming years, the cartel expects oil demand to soar as developing nations’ population rates and economies boom. The cartel expects demand to rise by almost 9 million barrels a day by 2025 to 105.5 million barrels a day, roughly 2 million barrels a day more than it was expecting last year.
Slowing demand in China coupled with Western nations’ transition away from fossil fuels will cause oil-demand growth to slow and come close to peaking in the middle of the next decade, followed by a “relatively long period of plateauing oil demand at the global level," the report said.
Still, the cartel expects that plateau to be at a higher level than it has forecast in recent years. It expects oil demand to peak at close to 110 million barrels a day from 2040, up from the 108.1 million barrels a day it was expecting last year.
For OPEC, calls to halt new investments in oil overlook the growing role of the developing world in the global economy. The cartel expects the global population to increase by 1.6 billion people between now and 2025, 96% of which occurring in the developing world.
Declining demand for oil from the wealthier nations that make up the Organization for Economic Cooperation and Development will be vastly outweighed by surging demand elsewhere in the world, OPEC said. Demand in non-OECD countries will rise by 23.6 million barrels a day by 2045, while OECD demand will fall by 10.7 million barrels a day, it said.
While an increase in the share of global energy supplied by renewables will be pronounced, fossil fuels such as oil, coal and natural gas will dominate the global energy mix for decades, OPEC said.
Those fuels will account for roughly 70% of global energy by 2045, down from 80% at current levels. The decline will largely come from the falling use of coal, while the share supplied by oil and gas will remain largely unchanged.
OPEC expects that the growing demand for oil will be met largely by OPEC itself. The cartel expects oil supplies from OECD nations will remain largely unchanged until 2045, while it forecasts its own supplies rising to 42.4 million barrels a day from 31.6 million barrels a day currently.
Even for OPEC, meeting that challenge could be difficult. The cartel has in recent months raised its production quotas to levels at which many of its members are producing at their maximum capacity. Still, many have been largely unable to meet their own production targets.
