New policies to promote low-carbon transport such as electric vehicles would curb future oil price rises and could lower global demand for crude by 11 million b/d by 2030, according to a new study commissioned by environmental groups.
As a result of further moves to cut greenhouse gas emissions, lower demand for oil would cut global spending on crude by $330 billion each year between 2020 and 2030, according to research led by UK-based Cambridge Econometrics.
The report warns that the era of "ultra-cheap oil" will be limited, with oil prices potentially rising to $130/b by 2050 without further action to tackle climate change.
If new policies are implemented to drive investment in low-carbon transport, the resulting fall in global oil demand could limit future oil price rises to between $83 and $87/b in 2050, according to the report.
Global demand for oil could be reduced by 11 million b/d by 2030 to 101 million b/d through new policy support and technological innovation on transport technologies, the report concludes.
"We have seen how vehicle standards around the globe have already reduced oil demand, and with governments increasingly waking up to the imperative to tackle climate change, we can expect this trend to strengthen," Drew Kodjak, executive director of the International Council on Clean Transportation (ICCT) said in the report.
Without major new finds or major changes in production techniques, increasing demand would push world prices above $90/b by 2030 and over $130/b by 2050, according to the report.
The findings of the study largely support the conclusions of the International Energy Agency's latest World Energy Outlook, which in November laid out long-term energy demand and supply forecasts under four key scenarios.
Under a scenario where atmospheric GHG emissions are constrained below 450 parts per million -- a level generally seen as consistent with meeting the 2 degrees C climate target -- the IEA said global demand for oil in 2020 would be around 93.7 million b/d, compared with 95.9 million b/d in its central scenario based on currently planned climate policies.
By 2040, the IEA estimates that global oil demand would be 29 million b/d lower under the 450 ppm scenario than the central estimate of 103.5 million b/d.
Under the IEA's central scenario, oil prices are also expected to move higher as world oil markets work off the current excess supply and return to balance at $80/b in 2020.
OPEC MARKET SHARE
Noting imminent moves by 130 countries to sign-up to the COP 21 climate deal, agreed at the end of 2015 in Paris, the study concludes that policy changes able "revolutionize the transport sector" would be needed to meet its oil demand assumptions.
New policies that further push vehicle efficiency and electric-drive technologies into the market and reduce fuel consumption by aircraft and ships could lead to an inflexion point in 2025, after which oil consumption would steadily decline.
Cumulatively, these policies could cut oil demand by 260 billion barrels between 2015 and 2050, according to the report.
The resulting reduction in demand for oil means long-term oil prices would settle in band between $83 and $87/b from 2030 to 2050, it concludes. With the new policies in place, oil prices would stand around 8.5% lower in 2030; 24% lower in 2040; and 33% lower in 2050, according to the study.
The study also forecasts that, if OPEC pursued a more aggressive strategy to boost market share, prices could be reduced further by 1.5-4% from the late 2030s. In this case, OPEC market share could increase from 40% to 44% in 2040 and to 48% in 2050. With prices returning to $80/b in the 2020s, however, US shale oil will return to production growth, the study assumes.
"We believe that around 75% of shale resources are economical to produce at prices above $80/b, and therefore as prices recover in all the scenarios we see an increase in US production until 2025," the study states.
