World Energy Outlook 2018

WEO 2019
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Oil

World Energy Outlook 2018 examines future patterns of a changing global energy system at a time of increasing uncertainties and finds that major transformations are underway for the global energy sector. Across all regions and fuels, policy choices made by governments will determine the shape of the energy system of the future.

Introduction

After the fallout from the 2014 oil price crash, the continued expansion of tight oil production in the United States and the prospect of major structural changes in oil consumption underpinned a view that the oil price was set to stay low for a very long time.

The reality has been different. On the supply side, while tight oil has proved remarkably resilient, geopolitical events, the slump in Venezuelan output, and decisions by major exporters have also weighed on production prospects. Meanwhile, on the demand side, lower prices have pushed up oil consumption. The oil price rose above $80/barrel in September 2018 for the first time since 2014, although it has come down since.

Where do we go from here? The forces of change in oil markets remain strong. A maturing shale sector is now poised to become profitable; the cost of new upstream projects has come down; and sales of electric cars continue to break records. But elements of continuity are also formidable, and another boom and bust commodity price cycle cannot be ruled out. Volatility may be the new name of the game.

Outlook by scenario

Oil production by region and scenario, 2017-2040

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Oil demand by region and scenario, 2017-2040

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In the New Policies Scenario (NPS), global oil demand growth slows but does not peak before 2040. Demand in 2040 is 106 mb/d, 11 mb/d greater than today. Demand in 2040 has been revised up by more than 1 b/d compared with last year’s Outlook largely because of faster near-term growth and changes to fuel efficiency policies in the United States. China becomes the world’s single largest consumer of oil in the 2030s and the largest net oil importer in history, importing over 13 mb/d in 2040. The United States dominates production growth to 2025: production increases by over 5 mb/d during that period to a peak of 18.5 mb/d. US production then starts to fall and OPEC steadily increases its share of total oil supply.

In the Sustainable Development Scenario (SDS), determined policy interventions to address climate change lead to a peak in global oil demand around 2020 at 97 mb/d. Demand peaks in nearly all countries before 2030. By 2040, cars that rely solely on gasoline and diesel are 40% more efficient than today; there are 930 million electric cars on the road (50% of the global car fleet); a quarter of buses are electric; and nearly 20% of fuels used by trucks are low or zero carbon. There are also major changes in most other sectors and as a result, total oil demand in 2040 in this scenario is 25 mb/d lower than today.

The only sector to register any growth is petrochemicals. Plastics recycling increases significantly from today’s levels which offsets the need for around 1.5 mb/d of oil demand in 2040. However, with few alternatives available, oil use as a petrochemical feedstock grows by 3.3 mb/d in the period to 2040.

On the supply side, lower demand and prices mean that production levels are down across the board. Although containing many of the least-cost suppliers, members of OPEC are assumed to maintain a policy of market management in this scenario (as in the other scenarios) and so their share of the market remains below 45% out to 2040.

Highlights

Change in global oil demand by sector in the New Policies Scenario, 2017-2040

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There is a major shift in the geography of oil demand in the NPS. Demand in developing economies grows by 18 mb/d to 2040 while demand in advanced economies drops by nearly 10 mb/d. There is also 3 mb/d growth in oil use in international aviation and shipping. Oil use in cars peaks in the mid-2020s. Some 300 million electric cars on the road avoid 3.3 mb/d oil demand in 2040. Improvements in the efficiency of the non-electric car fleet are even more important to stemming demand growth: these avoid over 9 mb/d of oil demand in 2040. This pace of change is not matched elsewhere. Oil demand for trucks grows by 4 mb/d and oil use in petrochemicals sees the largest growth of any sector at 5 mb/d.

Change in global oil product demand by scenario, 2017-2040

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The diverging sectoral oil demand outlook underpins a major shift in the composition of oil product demand towards lighter products. This move is amplified in the SDS. Adapting to dramatic increases in the demand for lighter products would represent an unprecedented challenge for refiners, and would send ripples through the wider energy system.

Change in global oil production in the New Policies Scenario, 2000-2040

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The United States provides nearly 75% of the increase in global oil production to 2025 in the NPS. After 2025, members of OPEC are central to meeting oil demand growth. US tight oil reaches 9.2 mb/d in the mid-2020s before declining slowly. But tight oil increases elsewhere, most notably in Argentina.

Oil production with no new investment from 2018 and demand by scenario, 2010-2040

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The level of conventional crude oil resources approved for development in recent years is in line with the needs of the SDS but is only half of the level needed to meet demand growth in the NPS. If these approvals do not pick up sharply from today’s levels, US tight oil production would need to triple from today’s level to over 15 mb/d by 2025 to satisfy demand in the NPS. With a sufficiently large resource base, this could be possible. But it would require levels of capital investment that would far surpass the previous peaks in 2014.
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