Business | Opinion
Opec foresees gloom until 2013
According to the film title "on a clear day you can see forever", but there is hardly a clear day given the devastating effects of the financial and economic crisis gripping the world.
- By Saadallah Al Fathi, Special to Gulf News
- Published: 23:02 July 12, 2009
According to the film title "on a clear day you can see forever", but there is hardly a clear day given the devastating effects of the financial and economic crisis gripping the world. It is indeed courageous to think of the prospects in the long term at a time when no one knows what will happen tomorrow.
The Organisation of Petroleum Exporting Countries (Opec) unveiled last week its World Oil Outlook 2009, a detailed annual study that has been made public for the last two years though it was an internal long-term study for a long time before.
It is prepared against the backdrop of the "massive" financial and economic crisis. In spite of governments' intervention and the "green shoots" of recovery, Opec sees the prospects of the world economy being "gloomy" at least to 2013 where growth could be resumed after 2010 but at an average annual rate of 2.3 per cent only and a large cumulative loss from previous expectations.
Thereafter, the long-term economic growth would resume, depending on population growth and productivity development.
World population is projected to grow from around 6.7 billion in 2009 to 8.3 billion in 2030 or at a rate of 0.9 per cent annually.
Productivity is a function of technological progress, education and training and is assumed to be at around 2 per cent per annum for the industrial countries and falling gradually to 1.5 per cent per annum towards 2030 while higher rates are assumed for developing countries.
Average world economic growth rate to 2030 is expected to be around 3 per cent per annum, which is lower by 0.5 per cent from last year's study, reflecting the impact of the current crisis. There will still be wide disparity of income distribution per capita among regions in spite of the improvement in developing countries.
Oil price assumptions are based on the behaviour of upstream costs and the cost of marginal liquid barrels. Energy policies, particularly the US Energy Independence and Security Act and the EU climate change and energy efficiency legislative packages, have been taken into consideration, reflecting the seriousness of policies on the oil and energy markets.
Efficiency improvements and the inroads of bio-fuels and renewable energy are policies that are bound to reduce the demand for oil.
Given the above assumptions, energy demand that quadrupled since 1960 is seen by the study to increase by 42 per cent between 2007 and 2030 or from 11.1 billion tonnes of oil equivalent (BTOE) to 15.8 BTOE. Fossil fuels will still supply 80 per cent of demand in spite of the growth from nuclear and renewable energy; oil is seen leading growth rates, followed by coal and gas.
Oil demand is expected to fall in the OECD region from 47.5 million barrels per day (mb/d) in 2008 to 45.5 mb/d in 2013 and world oil demand could be lower by 5.7 mb/d in 2013 from last year's study, reflecting the crisis where most of the drop is already noticed.
Further down the road, the impact of policies will be felt more and oil demand in 2030 is likely to be 106 mb/d or 7 mb/d lower than last year's study.
The growth will mostly be in the developing countries and OECD demand is expected to be flat since it peaked in 2005. The transportation sector will contribute 60 per cent of the growth, especially in middle distillates, as the car population will increase rapidly in developing countries.
On the supply side, there have been many cancellations and delays of projects due to the crisis and supplies from outside Opec are known to be more prone to price declines than other regions.
Therefore non-Opec supplies are likely to grow by a mere one mb/d by 2013 and will gain only a further 3 mb/d to 2030, essentially from expensive non-conventional oils.
Opec crude supply, having recently fallen drastically, may recover only to the 2008 level of 31 mb/d by 2013 and, thereafter, it will resume growth to 41 mb/d in 2030, which is just 2.5 mb/d lower than last year's study but still about 15 to 20 mb/d less than estimates of ten years ago. It is perhaps lucky for Opec that the decline in oil demand has been ameliorated by a moderate increase of non-Opec supplies.
Things may be less than comfortable in the medium term and will require diligence by Opec and its members. There are even risks in the long term and these and other variants of the study will be the subject of my next column.
The author is the former head of the Energy Studies Department at the Opec Secretariat in Vienna.
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