Alberta’s energy minister is unconcerned about a new report by the Organization of the Petroleum Exporting Countries (OPEC) that suggests demand for oil will plateau in a decade.
Alberta’s energy minister is unconcerned about a new report by the Organization of Petroleum Exporting Countries (OPEC) that suggests demand for oil will plateau in a decade.
“As we all know, plateau does not mean end of demand — it means end of continuous growth in demand,” Sonya Savage said in a written statement to CBC News on Thursday.
“Oil and gas will still be required as demand gradually declines. OPEC itself believes that oil will remain the largest contributor to the energy mix through 2045.”
The OPEC’s World Oil Outlook covers the period from 2020 to 2045. According to the report, demand for oil in 2020 is 90.7 million barrels a day. It will grow to 107 million barrels a day in 2030 and 109 million barrels a day in 2045.
“Global oil demand will grow at relatively healthy rates during the first part of the forecast period before demand begins to plateau over a relatively long period during the second half,” the report said.
It also acknowledges a gradual shift away from oil, noting that oil will make up 27.5 per cent of the energy mix in 2045, down from the 31.5 per cent in 2020.
Solar, wind and geothermal power will jump from 2.1 per cent of fuel sources in 2020 to 8.7 per cent over that same period, said the OPEC report. Natural gas will also see an increase from 23.1 per cent in 2020 to 25.3 per cent in 2045.
While demand for oil is expected to drop in OECD (Organization for Economic Co-operation and Development) countries, it will increase in places like India and China, due to “a growing middle class, high population growth rates and stronger economic growth potential.”
“The largest contributor to this incremental demand is anticipated to be India, adding some 6.3 [million barrels per day] between 2019 and 2045.”
The report reflects uncertainty about how long the current pandemic will last and whether changes prompted by COVID-19, like working from home and avoiding international travel, will persist.
Oil demand will also be impacted by the move to vehicles powered by electricity, natural gas and hydrogen, as well as measures to reduce climate change, the report said.
Richard Masson, an executive fellow with the school of public policy at the University of Calgary and chair of the Canadian chapter of the World Petroleum Council, said the OPEC report sees strong markets for oil over the next 25 years and noted that Canada is one of four non-OPEC countries that can increase production. .
“This scenario is good for Alberta,” Masson said.
“The challenge, of course, is OPEC notes that the commitments made under the Paris agreement are not being met and there needs to be further work by countries around the world to come up with solutions.”
Last month, a forecast from British Petroleum suggested demand for fossil fuels has already peaked due to lasting effects of the pandemic and a switch to renewable energy. The report looked at three scenarios — two suggested oil has already peaked, the third has demand reaching a peak around 2030.
Masson said COVID-19 may not have as big of an impact when viewed over a span of 25 years.
“The long-term demand has been driven primarily by more people in the world and more people moving into the middle class, especially in Asia. China and India [are] the two big drivers,” he said.
“And so COVID has changed our behaviour a little bit in the short term but the long-term outlook is fundamentally driven by that. And COVID will turn out to be probably just a blip on that long-term trend.”
Alberta, which has traditionally relied on oil and gas revenues to fund government services, has struggled to keep its deficit and debt in check in light of this year’s drop in oil prices.
Savage said the government is trying to diversify the economy by moving into mineral production, geothermal energy and small modular nuclear reactors.