Brent Crude oil prices could fall to $10 per barrel by 2050 if the world accelerates the energy transition with decisive action to achieve the Paris Agreement climate goals, energy consultancy Wood Mackenzie said on Thursday.
The scale of change if the world moves on track to limit global warming to 2 degrees Celsius would be so great that it would revolutionize the energy industry and sink demand for oil, the power of major oil producers, and oil prices, according to WoodMac.
Still, the consultancy’s Accelerated Energy Transition Scenario (AET-2) is just one of many scenarios for the future of global energy systems and not the base-case scenario, Wood Mackenzie noted.
Under the AET-2 scenario, global oil demand is expected to drop significantly and lead to a significant decline in oil prices. OPEC will likely have a market share of over 50 percent by 2050, but less control over the market because of the steep fall in demand, according to WoodMac. The low-cost producers in the Middle East would still be the main oil suppliers to the world, but prices could be as low as $10 a barrel Brent.
Although the scenario is neither a prediction nor a base-case scenario, the oil industry should not be complacent about the scale of change that would come from the energy transition, said Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie.
“The risks associated with robust climate-change policy and rapidly changing technology are too great,” Hittle noted.
Both Big Oil and the national oil companies (NOCs) will be severely impacted in case the world acts aggressively to put global warming under control and reach the goals of the Paris Agreement, Wood Mackenzie says.
“Our scenario would see the end of Big Oil and the rise of Big Energy. Financially strong integrated companies step up their investment plans to supplement dwindling upstream revenue with new cash flow from renewables, hydrogen and CCS,” the consultancy said.
Major international oil companies have already said they would invest more in low-carbon energy, including in hydrogen, carbon capture, and electricity from renewables, but most rely on cash flows from oil and gas operations to allocate more investments to low-emission energy solutions.
By Tsvetana Paraskova for Oilprice.com
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Neither the Paris Agreement climate goals nor zero emissions could be reached by 2050 and therefore the suggestion that Brent crude oil could fall to $10 can’t be substantiated.
The world is projected to need a minimum of 1.1 trillion barrels of oil between now and 2050 based on an average global oil demand of 103 million barrels a day (mbd).
The demand for oil is projected to continue to grow in absolute terms because of rising world population and growing global GDP reaching 9.9 billion and $262.65 trillion respectively by 2050. A wider introduction of electric vehicles (EVs) could only slightly decelerate growth in oil demand.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Investments are based on projections and assumptions so it is not strange there is difference in future outlooks. So something as basic as population growth projections vary in very significant ways depending on the institutions choices for parameters in their models. These have to be regular adjusted to the real numbers that evolve. At this point we have to adjust the idea that the population will continue to grow into the next century. In fact many new projections see the world population peak in the 2060’s and we are now at the point where we can talk about a population collapse on our planet. Many countries like Japan and China are projected to have only half its population left at the end of this century (that is 80 years). An older population will also drive less in their car.
If we want to understand this then oil can be hit this coming decades by a double whammy of both EV development and population decline in key markets. WoodMac might be very right with their projections for oil
Ships can run on hydrogen, planes can run on biofuel, for example. These are not cost comp-etitive at the moment- but in 30 years? So where is this magical demand for oil going to come from in 2050?
Someone selling horses and hay in the 1890's, extrapolating 30 years into the future would have seen a rosy future for both those products, and we know how that worked out.
If the price of oil falls too low, many countries exporting it will collapse. That will cause a global economic collapse from a global oil shortage. The USA, EU, China, India, and Japan would have to go into the Middle East and produce the oil, no matter the cost. Anyone trying to stop them would be eliminated. China and India would never run out of soldiers, unless they were fighting each other.
So don't wait for $10 oil. That can't work.