Whom to believe, OPEC or the IEA?

Energodigest | 10 November 2022
In our previous Energodigest, we wrote about the IEA’s World Energy Outlook, which is now followed by the World Oil Outlook, a similar set of forecasts authored by OPEC. As is traditional, we’d like to analyze how these forecasts have changed over the past year.

While in 2021, OPEC projected annual growth in primary energy demand at an average rate of 1% until 2045, it has now trimmed its forecast slightly, to 0.9%. For comparison, in its Stated Policies Scenario (STEPS) the IEA has lowered the growth rate until 2050 from last year’s 0.61% to 0.59% (see Fig. 1). OPEC also takes a more optimistic view of the prospects for fossil fuels, claiming that by 2045 the combined share of oil, gas and coal in the global energy mix will drop from about 80% to 69.5% vs. the 69.9% projected in 2021, while the IEA’s STEPS assumes that it will shrink to 67.2% in 2040 and 60.7% in 2050, compared with 70.3% and 66.1% forecast a year earlier, respectively.
OPEC has raised its projection for global oil demand to 109.8 million b/d in 2045, which is as much as 1.6 million b/d higher than was expected last year (see Fig. 2), with the main contributors to be OECD Americas and China (see Fig. 3). It is anticipated that oil demand will virtually stop growing after 2035 and will stay flat over a relatively long period of time, with this trend to be driven primarily by technology developments and energy policies adopted by some countries.
While OPEC and the IEA differ in their forecasts, experts agree that crude will remain a dominant part of the global energy mix at least until 2050 (see Fig. 4). In the aftermath of the pandemic, securing investment in the oil sector is becoming a challenging task — all the more so in light of the climate agenda. OPEC has upped its forecast of oil-related investment requirements from $9.2 trillion to $12.1 trillion, with 78.5% to be earmarked for exploration and production.

Next year, expectations might be adjusted further, impacted by a wealth of factors, with the most obvious being the outcomes of COP 27 and the US midterms.

In the prevailing uncertainty, it’s hard to predict which of the two organizations — OPEC or the IAE — will prove more accurate in their forecasts. The truth is likely to be somewhere in the middle.
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