World oil demand will plateau in the late 2030s and could by then have begun to decline, the Organization of the Petroleum Exporting Countries (OPEC) said on Thursday.
According to OPEC, it had downwardly revised its forecast for global oil demand growth over the long term, given the industry faced “an existential threat” this year in the wake of the coronavirus pandemic and as climate policies continue to shape the future of energy.
“At the global level, oil demand is expected to increase by almost 10 mbd (million barrels per day) over the long-term, rising from 99.7 mbd in 2019 to 109.1 mbd in 2045,” the cartel said in its latest World Oil Outlook report.
This baseline scenario represents 9.4 percent growth from pre-coronavirus consumption levels.
Under its slow growth scenario, OPEC expects 5.0 percent growth in oil demand.
And even with fast adoption of green technologies and tougher climate change policies, the cartel still sees a 3.1 percent increase in consumption.
“Global oil demand will grow at relatively healthy rates during the first part of the forecast period before demand plateaux during the second half,” said the report, which looks at the 2019-2045 timespan.
“Future demand will likely remain persistently below past projections due to the lingering effects of the COVID-19-related shutdowns and their effect on the global economy and consumer behaviour.”
While oil use to fuel cars, trucks and industry will rebound as economies bounce back, OPEC remains concerned that future growth may be partly offset by factors like a post-pandemic shift to working from home and teleconferencing over commuting, as well as efficiency improvements and a shift to electric cars.
“Proposed green hydrogen projects are surging across the globe as governments seize opportunities afforded by post-pandemic green stimulus packages,” Rystad Energy wrote in a note on Thursday.
Even before the pandemic, rising climate activism in the West and widening use of alternative fuels were putting the strength of long-term oil demand under more scrutiny.
Rystad said as governments establish COVID-19 recovery strategies, green hydrogen will be increasingly included as a key driver, especially in Europe.
OPEC, which is comprised of some of the world’s most powerful oil producers, said it anticipated policy instruments that primarily target objectives of the 2015 Paris Agreement on climate change would “continue to drive a transition to renewable energy sources and a reduction in greenhouse gas (GHG) emissions.”
However, the group added that “while many countries are notionally signed up to a global, collective effort to combat climate change, the majority of policies relating to energy demand and supply will continue to be set and enforced at the national level, resulting in continued disparity in the scope of policy ambitions among countries and regions.”
OPEC’s forecast sees oil demand as having already peaked in developed countries that are part of the Organisation for Economic Co-operation and Development (OECD). It predicts developing countries, on the other hand, will only see increased levels in demand.