India’s oil demand is expected to plateau in the mid-2040s under the current trajectory, BP Chief Economist Spencer Dale said on Wednesday.
He stated that global oil demand will plateau going forward until 2035, when it begins to decline. “In the current trajectory, the level of global oil demand in 2035 is exactly equal to the level of oil demand today. Oil demand for the next 10 years or so will flatline,” Dale told reporters at a briefing. The findings are part of the BP Energy Outlook 2024 report.
While many parts of the emerging world continue to witness increasing growth in oil demand, demand in developed regions, including the Organisation for Economic Co-operation and Development (OECD), has been falling for the last 15–20 years, he explained. “Chinese oil demand is expected to start declining by the end of this decade,” he said.
In June, the International Energy Agency (IEA) predicted that a steady increase in the supply of crude oil will outpace global demand, resulting in a glut in the market by 2030.
The BP report shows that demand for oil in road transport will fall by the largest margin. This decline would occur due to improvements in vehicle efficiency, alongside rising sales of electric vehicles, Dale said. “In India, we have seen increasing electrification of electric two-wheelers, but now natural gas two-wheelers have a role to play. We are less clear as to whether the move away from oil-based vehicles will be driven mostly by electric or natural gas-powered vehicles,” he said.
Non-Opec supplies
On his forecast for oil prices and supplies in the short term, Dale said global markets remain worried about the events in the Middle East.
“In terms of the fundamentals of the outlook, most of the consensus for the next year is that oil demand continues to grow. But many of those outside forecasts also point to strong growth in non-Opec-plus supplies, with many of those scenarios suggesting this would largely meet the growth in overall demand,” the economist said.
The three main sources of growth in production capacities in this list of countries would be the United States, due to a growth in US tight oil volumes, Brazil, and Guyana, he said.
“That would mean the scope for Opec to bring back production capacity would be relatively limited,” Dale added.
An intergovernmental organisation of 13 major oil-producing nations, including Saudi Arabia, Iran, Iraq, and Venezuela, among others, Opec is considered a ‘cartel’ by economists. Member countries accounted for an estimated 37 per cent of global oil production and 79.1 per cent of the world’s ‘proven’ oil reserves as of 2023. A loose alliance of 10 other oil-producing countries, led by Russia, is referred to as Opec-plus.
In June, Opec+ nations agreed to extend two sets of voluntary production cuts. The grouping extended total production cuts of 5.86 million barrels per day (b/d), or 5.7 per cent of global oil demand.
This includes a headline production cut of 3.66 million b/d by a year until the end of 2025. It will also prolong the 2.2 million b/d production cuts currently being implemented by eight countries, including Saudi Arabia and Russia, by a further three months until September-end. These were set to end by June but will now be phased out over a year from October 2024 to September 2025.
First Published: Aug 21 2024 | 6:46 PM IST
