Opec recognises concept of peak oil demand
Amid a decline in global oil demand due to the Covid-19 pandemic, Opec has, for the first time, placed a date on the likely point of peak oil demand
On 13 October, the Paris-based International Energy Agency (IEA) reaffirmed its long-held position that global demand for oil will peak in 2030, although it lowered its 2030 demand projection by 2 million barrels a day (b/d) from its 2019 forecast.
The IEA’s end-is-nigh projection for oil is part of a growing chorus of gloom about the long-term outlook for oil. In September, BP said that global oil markets may never recover to pre-pandemic demand levels of about 100 million b/d.
The principle dissenters from this Peak Oil narrative have been the Middle East’s oil producers represented by Opec. Until now.
After years of denying the concept of Peak Oil, the oil producers group acknowledged the concept of global “peak oil demand”, predicting that the world’s need for oil will cease to grow in the 2040s.
In its ‘World Oil Outlook’ report, published on 8 October, Opec estimated that global demand would continue rising to a peak in demand of 109.3 million b/d in 2040, before sliding to 109.1 million b/d in 2045 and then plateauing “over a relatively long period”.
The admission has been a long time coming and is based on factors such as the coronavirus pandemic rattling oil demand for years to come, plus the growing share of non-oil sources in the global energy consumption mix, facilitated by countries scrambling to meet their environmental sustainability goals.
Unsurprisingly, Opec’s demand projections remain far more optimistic for long-term oil demand than the IEA’s and BP’s outlook. But for the oil producing bloc, which together with its Russia-led alliance partners, controls over half of the world’s oil production, to admit that the world’s requirement for oil is going to hit a peak is a considerable change of position.
Opec will likely use its latest forecast to support further collective action to manage oil production levels with the outlook for demand in order to protect prices from plummeting in future and to safeguard the economies of its member nations.