OPEC Bullish on Oil Demand, Unsurprisingly.

In contrast to the IEA’s bearish view on oil demand growth that it reported last week, this week OPEC has produced its oil demand forecast out to 2050 and it is definitively bullish. 

In its World Oil Outlook published on 10 July, OPEC says that “global energy demand is set to expand by 23% to 2050, driven by expanding economic growth, rising populations, increasing urbanization, new energy-intensive industries like artificial intelligence, and the need to bring energy to the billions without it.” However, OPEC notes that, “it is the developing world – the non-OECD – which sees almost all energy demand growth over the outlook period.”

The report includes a critique of the entire concept of net zero, based on the premise that each energy transition – from wood to coal, coal to oil, oil to renewables – has led to greater consumption of the previous fuel. The history of energy consumption, OPEC argues, is one of energy additions, not substitutions. 

The report also dismisses the energy transition as over-ambitious and unworkable. The report states decisively: “It has become increasingly clear to many policymakers in recent years that the narrative of swiftly phasing out oil and gas has been seen for what it is: unworkable, and a fantasy.”

Underpinned by this conviction, OPEC goes on to list the benefits of oil: and petroleum products: “Without them, cars, buses and trucks would be stranded, airplanes would be grounded, the construction sector would all but grind to a halt, food production would be devastated, and many health-related products would be difficult to produce. Oil underpins the global economy and is central to our daily lives.” 

On the basis then that “There is no peak oil demand on the horizon” OPEC forecasts that by 2050 oil demand will be 123 Mn bpd, about 18 Mn bpd higher than today. 

Is OPEC right, or is it talking up its own book? The total unwinding of its two year long 2.2. Mn bpd cut in production not only looks like it is going for greater market share, but coincides with the US Energy Information Administration's recent admission that US oil production will peak this year or next. If America has to return to the Middle East for oil supplies, it will be harder than ever to disentangle itself from the region, as Mr Trump and the America First ideologues would like.