Brian Sullivan: Five key takeaways from OPEC’s 2045 oil outlook

As seen on July 8, 2021 from Bakersfield (California), oil pumping rigs can be found next to a vine of table grapes. Getty Images
The Organization of the Petroleum Exporting Countries published a "World Oil Outlook 2045" opus. It's a hefty 340-page opus from the Organization of the Petroleum Exporting Countries. Although it's not the most straightforward to read, the Vienna folks graciously gave us a 30-page Executive Summary and an interactive edition. OPEC's statements about oil demand, future cars, and other fossil fuel-related issues will be dismissed, if it is not mocked. The organization is one of the petroleum-exporting nations. OREC does have a certain ring, but it's not one of the renewables-exporting nations. The group and its researchers did an excellent job of compiling a lot data, information, and projections into Tuesday's report. During my visits to OPEC headquarters, Austria, I met some of the people who helped me put this together. They aren’t oil smugglers. Instead, they are scholarly academics who work in a well-stocked library. They are much more pragmatic than you might expect for an advocacy group. There is a lot of material to be discussed and debate in the 2045 Outlook. Here are five things that stood out to me.

1. 1.

An oil and fuel organization's projection that oil and other fossil fuels will continue to exist is probably the most surprising thing you'll ever see. OPEC's projections of global population growth are not surprising. They also predict a global energy mix that will be in place within the next few decades. Their basic argument is that the global oil demand will increase until 2045. Don't be too harsh with them. There are many Wall Street firms that have projections that are not far off. Here is what OPEC has to say about oil demand. "Global primary energy consumption is expected to rise by 28% between 2020-2045. This is driven by a doubling of the world economy and an additional 1.7 billion people by 2045. With the exception of coal, all energies are experiencing growth. The largest growth is in renewables, followed closely by gas. However, oil will likely retain its top spot in the energy mix.

2. It's not the 'U.S.A.' It's not the United States.

While we can laugh at this projection while we are sitting in our comfortable homes tweeting from our iPhones, OPEC reminds that there is a huge world out there. It is growing and expanding in countries that aren't as well-known as the United States or Western Europe. It will be from countries with substandard electricity, where a car is an asset. These are OPEC projections for global population growth. "The global population will reach 9.5 billion by 2045. The future demographic trends will be marked by an increasing working-age population, an aging population, and increased urbanization and migration rates. The projected global working-age population (1564), will increase by approximately 900 million during the projection period.

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3. The renewables boom type of

Good news for the renewables sector? The demand for "other renewables," such as solar and wind, will rise. OPEC still sees this as less than 10% of global fuel sources in the next 25 years. Oil continues to decline, coal keeps falling and natural gas is growing. And nuclear continues to be ignored. Here's OPEC’s report on energy demand. "Demand to use other renewables is expected to grow from 6.8 MB/d [million barrels oil equivalent per day] in 2020, to 36.6 MB/d by 2045. This represents the single-largest incremental energy contribution to the future energy mix. It is also the fastest growing energy source, with its share of the global primary energy mix at above 10% by 2045. This compares to just 2.5% in 2020. This is due to falling costs and policies that reduce emissions.

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4. Electric vehicles will impact oil demand, but perhaps not as much as you think.

Many optimistic projections surround the growth of electric vehicles sales. Why not? They sell quickly when new cars such as Rivian, Lucid, or Ford's electric F-150 pickup truck are announced. There are many reasons for being bullish. To understand OPEC's first point regarding where growth will come, we must consider the rest of the world. Perhaps a billion people don't have access to reliable electricity or clean water. Any car can make a huge difference in the lives of hundreds of millions of people. Many of these cars will be inexpensive and internal combustion powered. That's at least what OPEC plans. It still expects 500 million EVs to be in place by 2045. That's a huge number. OPEC outlined its expectations regarding vehicle demand. "The total vehicle fleet will reach 2.6 billion by 2045, an increase of around 1.1 billion over the 2020 level. The global fleet of EVs will reach 500 million by 2045. This represents almost 20%. Natural gas vehicles (NGVs) are also expected to grow with an 80 million increase between 2020-2045. Consequently, internal combustion engine vehicles (ICE) will continue to play a leading role in the global fleet's composition. The global vehicle population will be 76% ICEs by 2045. This is largely due to the increase in the size of the fleet in developing countries.

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5. Texas (and possibly New Mexico) take off again