With all the turbulence that we have seen in oil prices quite lately, OPEC is now of the opinion that oil demand might peak within 15 years from now. Further, OPEC has highlighted that uncertainties associated with energy and environmental policies at both national and international levels pose challenges for the outlook for energy demand and supply, especially in the long term. Particularly, OPEC indicates this to stem in from challenges emanating at the back of adoption of alternative fuel cars and other climate change technologies with support from the recent Paris climate agreement targets. The key things to note include:
Expansion of oil demand to 2040 and beyond: OPEC expects to have core scenario seeing oil demand continuing to expand to 2040 and beyond. Along these lines, oil demand has been said to peak in 2029 at 100.9 million barrels a day. Thereafter, there may be drop to 98.3 million barrels a day by 2040. This year, oil demand is seen at about 94.4 million barrels a day, as per OPEC. However, these forecasts are subject to the overall global strategy in terms of less aggressive efforts being undertaken, if at all, on emission control.
Threat from Climate Agreement: The COP21 climate agreement of Paris has been into effect now with an aim to control average global temperatures which should not rise more than 2C above pre-industrial levels. This comes at the back of individual country taking a pledge to keep a check on the respective greenhouse gas emissions. However, as per the OPEC’s forecast and view, poorer nations whose pledges are conditional on financial support may be able to keep up with the terms of the Paris targets. At the same time, many believe that expansion of electric car fleet along with new car sales by 2040 will displace about 14 per cent of current oil demand.
More is to be understood in terms of OPEC’s stance and future strategy, and market is now keeping an eye on OPEC’s next meeting which is due on November 30, 2016 in Vienna.
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