• Crude Oil to remain number one fuel till 2045
Energy and oil demand according to the Organization of Petroleum Exporting Countries (OPEC) have picked up significantly in 2021 after the massive drop in 2020 as economies recover from the pandemic, reports GIDEON OSAKA
OPEC in the 15th edition of its World Oil Outlook 2045 released on Tuesday September 28, said that continued expansion is forecast for the longer term. OPEC Secretary General Mohammad Barkindo in the foreword to the report wrote that global primary energy demand is expected to increase by 28% in the period between 2020 and 2045, with all energies required, driven by an expected doubling in size of the global economy and the addition of around 1.7 billion people worldwide by 2045.
According to the report, all energies witness growth, with the exception of coal. Renewables see the largest growth, followed by gas, but oil is still expected to retain its number one position in the energy mix. Underinvestment, the report stated, remains one of the great challenges for the oil industry and this was exacerbated by the COVID-19 pandemic.
“Over the course of 2020, investments declined by around 30%. Without the necessary investments, there is the potential for further volatility and a future energy shortfall, which is not in the interests of either producers or consumers”
“Over the course of 2020, investments declined by around 30%. Without the necessary investments, there is the potential for further volatility and a future energy shortfall, which is not in the interests of either producers or consumers. OPEC Member Countries remain committed to supporting investments, which benefit from sustainable market stability and the right enabling environment. This is a core focus of the declaration of Corporation (DoC).”
OPEC maintained that oil is forecast to remain the fuel with the largest share of the global energy mix until 2045. The report said, primary oil demand is set to increase in the long-term from 82.5 mboe/d in 2020 to 99 mboe/d in 2045.
Despite decelerating oil demand growth in the second part of the forecast period and strong growth in other energy sources, such as other renewables, gas and nuclear, oil is expected to retain the highest share in the global energy mix during the entire period.
In 2020, oil accounted for 30% of global energy requirements. Alongside post-pandemic oil demand recovery, the share of oil is anticipated to gradually increase to a level of more than 31% by 2025, before it begins a decline and reach 28% by 2045.
The report said: “Other renewables and natural gas are projected to contribute most to future incremental energy demand. Demand for other renewables is projected to expand from 6.8 mboe/d in 2020 to 36.6 mboe/d in 2045, representing the single-largest incremental contribution to the future energy mix. Moreover, it is also the fastest-growing energy source with its share in the global primary energy mix above 10% in 2045, up from just 2.5% in 2020. This is driven by falling costs and policies focused on reducing emissions. Gas demand is expected to increase by 21.6 mboe/d between 2020 and 2045. This brings total gas demand to 85.7 mboe/d in 2045, thus becoming the second-largest fuel in the energy mix.”
OPEC however, lowered its estimates for longer-term oil demand, citing changes to consumer behaviour brought about by the pandemic and competition from electric cars. Global demand is expected to plateau after 2035, the report said.
“Tele/homeworking is becoming a norm for many companies as a result of the pandemic,” OPEC said.
“Long-term oil demand growth will be limited by growing penetration of electric vehicles (EVs) The total vehicle fleet is expected to reach 2.6 billion by 2045, increasing by around 1.1 billion from the 2020 level. EVs are set to approach 500 million by 2045, representing almost 20% of the global fleet. Some growth is also projected for natural gas vehicles (NGVs), with an expected increase of 80 million projected between 2020 and 2045. As a result, internal combustion engine (ICE) vehicles are set to maintain their leading role in the composition of the global fleet. The outlook sees ICEs constitute about 76% of the global vehicle population by 2045, largely sustained by the fleet size increase in developing regions. These developments are expected to keep road transportation oil demand in a narrow range of 46 mb/d to 46.5 mb/d after 2025.” It added.
OPEC’s World Oil Outlook (WOO) is part of the Organization’s commitment to market stability. The publication is a means to highlight and further the understanding of the many possible future challenges and opportunities for the oil industry. It is also a channel to encourage dialogue, cooperation and transparency between OPEC and other stakeholders within the industry.
The 340-page report sketches out a future of declining demand for oil in wealthier countries that belong to the 38-member Organization for Economic Development and Cooperation, as efforts to fight climate change take hold in the form of renewables and alternative fuels in cars, airplanes and ships. It forecasts that the world’s vehicle fleet would grow by 1.1 billion to 2.6 billion by the end of the report’s time frame in 2045 — and that 500 million of those would be electric powered, or 20% of all vehicles.
But growing populations and expanding middle classes in the rest of the world including China and India will mean increased demand for oil between 2020 and 2045, although much of that increase will take place in the earlier part of that period, the report, produced by OPEC’s secretariat in Vienna, said.
Oil will satisfy 28.1% of the world’s energy demand by 2045, down from 30% in 2020 — but ahead of natural gas with 24.4% and coal with 17.4%. Hydroelectric, nuclear and biomass energy sources and other renewables such as wind and solar make up the rest.
A key reason cited for declining energy use in the more-developed world was demography: shrinking and aging populations that usher in lower economic growth.