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.
While the forecast marks a major shift for the cartel and reflects the lasting effect of the coronavirus crisis on the economy and consumer habits, it is still much rosier than peak oil forecasts by some major oil companies.
BP released a report last month that said demand for oil may have peaked last year, noting the market for crude may never recover from the blow delivered by the coronavirus.
As recently as July, Royal Dutch Shell said it sees oil demand peaking in the early 2030s.
In its 2020 World Oil Outlook, OPEC sees oil use rising to 107.2 million barrels per day (bpd) in 2030 from 90.7 million bpd in 2020.
That is 1.1 million bpd below its 2030 forecast last year and more than 10 million bpd below its 2007 prediction of 2030 demand.
“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.
Japan and Korea are also considering importing hydrogen and developing international supply chains, especially in transportation. And in the United States, the Biden campaign has made clean energy central to its mandate.
OPEC remains concerned the pandemic could hit demand permanently, which current and former officials say could pressure oil prices and challenge efforts to balance the market.
This year OPEC, with Russia and other allies, a grouping known as OPEC+, agreed to record output cuts of 9.7 million bpd, the equivalent of 10 percent of global supply.
OPEC still sees oil demand rising in the next few years, unlike some others.
The cartel is forecasting oil use will jump to 97.7 million bpd next year, reaching 99.8 million bpd in 2022 – above the 2019 level – and grow to 102.6 million bpd by 2024, OPEC predicts.
OPEC forecast it will pump more in 2021 than this year’s expected 30.7 million bpd, but rising supply from the US and other outside producers means OPEC output in 2025 will likely be 33.2 million bpd, below 2019’s level, it said.
Longer term, its reference case is for oil demand to reach 109.3 million bpd in 2040 and decline slightly to 109.1 million bpd by 2045.
OPEC said the pandemic had accelerated a trend for lower oil use in industrialised Organisation for Economic Co-operation and Development countries, and non-OECD growth.
Electric cars are gaining share and there is “a constant improvement in battery economics”, OPEC said. They will account for more than 27 percent of new cars globally by 2045.
Nonetheless, OPEC still hopes to boost production in the coming decades as rival output declines.
“Oil will continue to account for the largest share of the energy mix by 2045,” OPEC Secretary-General Mohammad Barkindo wrote in the foreword to the report.