OPINION: Opec's latest World Oil Outlook offers reassurance to the hydrocarbon sector.

The report acknowledges that the industry faces a nasty jolt from the Covid-19 pandemic, but predicts a quick return to the status quo.

The publication brought a small spike in the Brent price, but oil-buyer optimism soon faded amid wider concerns.

That was the right response from investors: Opec’s optimistic view on future oil demand should be treated with caution.

The cartel argues global oil demand will bounce back to pre-crisis levels in 2022 and not peak for at least two decades.

That is surely wishful thinking, which may please the heads of state in Middle Eastern crude-producing countries that lead Opec and fund the research arm that produces these forecasts.

It will also delight those oil executives who do not want to accept that the world of energy is changing fast.

Conflicting views

But it conflicts with the International Energy Agency’s (IEA) World Energy Outlook, released this week, which predicts crude consumption will probably reach a high point within the next decade.

The Opec report also collides with the recent BP forecast that oil demand may have peaked already — a view shared in a more cautious way by rival Shell.

These companies and other European oil majors are now basing their corporate plans on moving away from a shrinking crude market. They also face investor pressure to decarbonise in the face of global warming.


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Yet the Opec report barely mentions climate change and seems to presume that most countries will not take their Paris climate agreement commitments too seriously.

And it fails to recognise that post-Covid state economic recovery packages are partly being targeted at “green” infrastructure.

There is a widespread ministerial commitment in China and Europe to encourage renewable power, energy efficiency and electric vehicles.

The latest report does at least acknowledge the concept of peak oil demand.

If Joe Biden wins the forthcoming presidential election, the US will also follow this path.

The IEA says solar power is now cheaper than natural gas or coal for generating electricity in much of the world.

Return to business as usual?

Yet Opec’s assumption that global oil demand will rise from the pre-Covid 100 million barrels a day in 2019 to 109 million bpd by 2040 clearly envisages a return to “business as usual”.

That would sit uneasily with many government targets of reaching net zero carbon dioxide emissions by 2050 — or 2060 in the case of China.

Those goals can only be met by hundreds, if not thousands, of new carbon capture, utilisation and storage plants being built to reduce greenhouse gas emissions.

Such investment is not seen as feasible without strong carbon taxes, which in turn would further dent oil demand.

The Opec report also predicates its upbeat oil-demand forecasts on the hard-hit aviation sector returning to normal in double-quick time, though one leading plane maker, Boeing, says it expects sales to be hit for at least a decade.

However, the latest report does at least acknowledge the concept of peak oil demand, albeit claiming it will not happen until the 2040s.

Leading Opec members had previously dismissed such talk as “misguided.”

The organisation believes that by 2045, crude will provide 27% of total global energy needs, with gas on 25% and coal on 20%.

That would be a success for fossil-fuel producers but a failure for the planet.

(This is an Upstream opinion article.)