Organization of the Petroleum Exporting Countries (OPEC) sees oil demand continuing to grow to the middle of next decade, even as world leaders prepare for another attempt to avert catastrophic climate change.
Global fuel consumption will fully recover from its pandemic slump by 2023, and will keep growing until it hits a plateau shortly after 2035, OPEC said in its latest long-term report.
The forecasts suggest scant expectation that the COP26 conference to be held in Glasgow, Scotland, in just over four weeks will culminate in a quick pivot from fossil fuels.
“There are still considerable doubts as to whether all these ambitious climate-mitigation commitments will be met in the proposed timeframe,” the organization’s Vienna-based secretariat said. The group’s members include the biggest Middle East crude producers.
Global oil demand suffered an unprecedented slump last year as travel and economic activity were curbed by efforts to battle the coronavirus. OPEC forecasts that consumption will rebound above 100 million barrels a day in 2023, and continue to advance to 107.9 million a day in 2035. The projections are little changed from last year’s report.
There are still considerable doubts as to whether all these ambitious climate-mitigation commitments will be met in the proposed timeframe.
OPEC’s World Oil Outlook, published on Tuesday, echoes comments from group leader Saudi Arabia earlier this year that hopes to reach net-zero carbon emissions by 2050 by slashing fossil fuel investments are a “La La Land” fantasy. While the report acknowledges that renewables are the fastest growing energy source, it projects they will account for just 10% of the world’s needs in 2045.
Before the current energy crunch that’s helped drive Brent crude above $80 a barrel and European natural gas prices to record highs, OPEC had started gradually restoring the output that it shuttered when the pandemic erupted last year. It expects to be a beneficiary of the coming revival in fuel use.
The oil industry is at a critical juncture. Some energy companies and traders say the lack of spending on fossil fuel projects amid the fight against climate change will result in a supply shock, potentially driving oil prices even higher. On the other hand, governments, society and investors are pushing companies to produce cleaner fuels.
Made up 13 nations that rely on petroleum sales to fund their budgets, OPEC is hardly a neutral observer. Others in the oil market, like the International Energy Agency (IEA) and TotalEnergies SE, expect demand will hit a limit earlier, somewhere around the end of this decade.
Demand for OPEC’s combined crude oil and condensate supplies will climb from last year’s 30.7 million barrels a day to 42.7 million in 2045, according to the report. Its share of world oil markets will expand from 33% currently to 39% by that year. However, the organization gave no separate projections for its crude production — the component it uses to balance world supply and demand.
The group expects to initially face some competition from its key rival, the U.S. shale industry. American tight oil output will increase from last year’s average of 11.5 million barrels a day to 14.8 million in 2026. But OPEC expects that growth in shale will taper off toward the end of the next decade, clearing the way for the organization.
“The burden is expected to be on OPEC members to provide much of the oil to meet the world’s needs,” it said in the report.