Winner in the global energy transition

OPEC predicts an unlikely winner in the face of an energy revolution away from hydrocarbons, predicting the cartel will significantly increase its dominance in the global oil market over the next two decades.

The Organization of Petroleum Exporting Countries said in its annual report on long-term energy trends that it expects global oil demand to rise gradually over the next two decades.

It projects that by 2045, the oil produced by its members will account for 39 percent of world crude consumption, up from around 33 percent today. According to the group, the Middle East, dominated by OPEC countries such as Saudi Arabia and the United Arab Emirates, will transport 57 percent of the world’s oil exports by 2045, up from 48 percent in 2019.

According to the paper, the group’s market share gains will come as production by other major producers, particularly the United States, ebbs due to decreased investment in new hydrocarbon exploration.

Non-OPEC supply is expected to “plateau and peak” in the late 2020s, according to OPEC. According to the analysis, American oil production is anticipated to shrink by 1.5 million barrels per day by 2045 compared to 2019.

The forecast, buried in OPEC’s widely monitored World Oil Outlook, highlights what some oil executives and energy-market analysts think is an underestimated driver driving many wealthy economies’ desire to shift away from fossil fuels.

Boost crude output

Increasing OPEC’s share of the global oil market would increase its ability to influence crude prices. Unlike other producers, Saudi Arabia and some other members have what is known as spare capacity—oil reserves that can be pumped out of the ground rapidly. Last month, for example, the Biden administration urged OPEC to expedite its plans to increase petroleum output to satisfy post-lockdown demand.

The proposal came at a time when gasoline costs in the United States were skyrocketing. OPEC has refused to move any faster. The estimate comes as oil prices have reached multi-year highs. On Tuesday, international crude prices approached $80 per barrel, the highest level in three years.

With an existential stake in global oil demand, OPEC employs a staff of experienced economists who go through data from members and other sources. The organization issues a series of influential studies that many people rely on to measure fundamental supply and demand.

According to OPEC, wind and solar will triple their overall global energy market share and supply around 10% of global energy demand by 2045, up from 2.5 percent today. On the other hand, OPEC stated that the world needs to invest $11.8 trillion through 2045 to fulfill predicted growth in fossil-fuel demand and compensate for expected declines in output at current areas. It warned that if such investments are not made, the globe will face rising oil costs.