OPEC has launched its World Oil Outlook publication on the 8th of October with extended forecasts up to 2045 this time. The report is meant to provide forecasts regarding the future of energy supply & demand and the key drivers behind the world’s energy balances.

OPEC recognized that COVID was (and still is) an existential threat to the oil & gas industry. However, they see recovery of oil demand to 2019 levels by as early as 2022 driven by “demand catch-up” on key sectors and by developed economies demand picking up as no nationwide lockdowns are expected.

What’s important though is that in the long-term OPEC sees peak oil demand for the first time before 2045. And indeed, in last year’s publication the forecast only went up to 2040 but peak oil was nowhere to be mentioned

On the energy demand side of things, here are some key points:

• Oil to remain the dominant fuel in primary energy demand by 2045 with 27.5% share

• Gas to be the fastest growing fossil fuel up to 2045 on a 1.7% CAGR

• Renewables to grow their share to 8.7% up to 2045 on a 6.6% CAGR basis, significantly faster than any other source of energy

• Nuclear to grow by 1.7% CAGR to 2045

• Coal is the only energy source set to decline by 0.3% CAGR to 2045

Petrochemicals are still expected to be among the key drivers of oil demand growth with 3.7 mmbld of incremental demand additions to 2045 with aviation and road transport adding 2.8 and 2.6 mmbld respectively.

Regionally OPEC forecasts strong oil demand growth from China and India despite the former’s net-zero pledge by 2060.

On the supply side, OPEC sees that the US shale will take the toll from COVID. The US shale production is expected to peak in 2030 and decline thereafter. Peak level will now only reach 15.8 mmbld according to OPEC, a downgrade of 1.5 mmbld from last year’s report.

Regarding energy transition policies OPEC sees no threat to oil demand arising as they consider these policies to be applied at the national level only (except for the EU), resulting in disparity in the scope of policy ambitions. And this is partly true if we think that there is essentially no universal rule on carbon pricing and no institution that can ‘actually’ impose regulations at the global level.

US continues to remain a wildcard as the result of the upcoming elections would be key with regards to new energy policy setting. A Democratic win and the continuation of the tax credit for renewables deployment would act as an accelerator of the energy transition. On the other hand, a Trump victory is likely to promote further oil-friendly policies in the form of tax breaks.

On the climate and emissions mitigation front, OPEC has developed two extra scenarios (different from its reference case) that have as common, a point large drop in coal demand and:

• Significant energy efficiency gains and regulations in the industrial sector with rapid renewables deployment and oil & gas demand reduction

OR

• Rapid deployment of CCUS, growth in nuclear capacity with stable oil & gas demand in the long-run

What’s important is that OPEC has introduced a new chapter in the publication: “Oil demand and supply uncertainties”.

Climate change, economics and policy and technology advancements are the key demand differentiators while oil price and the US tight oil are the supply side uncertainties.

Long story short: OPEC recognizes the possibility of peak oil for the first time in its history.

Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.