OPEC is forecasting an unlikely winner amid an energy shift away from hydrocarbons, predicting the cartel itself will dramatically boost its influence in the global oil market over the next two decades.
In its annual report on long-term energy trends, the Organization of the Petroleum Exporting Countries said it expects global oil demand to grow steadily over the next two decades. By 2045, it predicts its members’ oil will constitute 39% of global crude consumption, up from about 33% now. The group said it expects the Middle East—dominated by OPEC members like Saudi Arabia and the United Arab Emirates—to ship 57% of the world’s crude exports by 2045, up from 48% in 2019.
The group’s market-share gains will come as production by other big producers, including the U.S., ebbs amid falling investment in new hydrocarbon development, according to the report. Non-OPEC supply is forecast to “plateau and peak” in the late 2020s, OPEC said. American oil production is expected to fall by 1.5 million barrels a day by 2045 compared with 2019, the report said.
The forecast, contained in OPEC’s closely followed World Oil Outlook, underscores what some oil-company executives and energy-market analysts say is an underappreciated dynamic behind many richer economies’ push to transition from fossil fuels to lower-emission energy sources: Despite that shift, demand for oil and natural gas is expected to continue for years to come.
In the short term, that holds potential benefits for players who haven’t committed to curtailing their own oil and gas output—like OPEC.
“OPEC will be perhaps more vital to oil markets than at any time in its history,” said Neil Atkinson, an independent energy consultant and the former head of oil market research for the International Energy Agency, an energy watchdog that counts rich governments like the U.S. as members.
By increasing its share of the global oil market, OPEC would also boost its power to influence crude prices. Unlike most producers, Saudi Arabia and several other members have what is called spare capacity—oil reserves that can be quickly pumped out of the ground. That allows the group to raise and lower its collective output depending on global demand, acting like a central bank for oil markets and often moving prices with its actions.
Last month, for instance, the Biden administration called on OPEC to accelerate its plans to boost crude output to help meet post-lockdown demand. The request came as U.S. gasoline prices were rising sharply. OPEC declined to move any faster.
The forecast comes as oil prices hit multiyear records. International crude prices neared $80 a barrel on Tuesday, their highest level in three years.
OPEC, with an existential stake in global oil demand, employs a team of professional economists who pore over data from members and from outside sources. The group publishes a series of influential reports that many use to gauge fundamental supply and demand.
In its report, OPEC said that overall global demand for oil will increase 28% over the next two decades, to 108.2 million barrels a day, up from about 100 million barrels a day in 2019, before the pandemic curbed demand. OPEC, whose members have met for decades to ensure comfortable prices for their governments, forecast the group will boost its own output by more than 23% over that period.
It said that most of the new oil demand growth will come from the developing world, where oil demand is expected to climb 52% in that period.
OPEC forecasts wind and solar will quadruple in terms of overall global energy market share, and will meet about 10% of the world’s energy demand by 2045, up from 2.5% currently.
That would eat into OPEC’s overall influence in energy markets, but the cartel forecast only a modest shift. By 2045, it said, oil’s overall role as an energy source will still command the biggest market share—28%, versus 30% today. Natural gas, another hydrocarbon, will represent 24.4%, up from 23%.
The OPEC report comes ahead of a United Nations conference on climate taking place in Glasgow, Scotland, in November. Many countries have pledged to reduce emissions to slow down what most scientists agree is man-made warming of the planet.
They cite so-called greenhouse gas emissions, including carbon dioxide, that are released when fossil fuels are burned for energy. A similar summit, in Paris in 2015, committed to keeping any such warming limited to about 1.5 degrees Celsius above preindustrial levels.
Oil-consuming governments, including the U.S., have promised to cut emissions drastically by embracing renewable energy sources like wind and solar power. The IEA has said reaching net-zero emissions is key to keeping inside the 1.5 degree Celsius window. It said earlier this year the world needed to immediately halt investment in hydrocarbons to achieve net-zero emissions by 2050.
OPEC, by contrast, said the world needs to invest $11.8 trillion through 2045 to meet expected fossil-fuel demand growth and make up for the expected decline in production at existing fields. Without such investment, it said, the world risks higher oil prices.
“Underinvestment remains one of the great challenges for the oil industry,” OPEC said. “Without the necessary investments, there is the potential for further volatility.”
—Summer Said contributed to this article.
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