When you read your horoscope, do you chuckle at the absurdity of it, seize on the nuggets of information that ring true, or plan your life according to its warnings?
Replace mystics with long-term forecasters and there are eerie similarities. When predictions for one year ahead are about as accurate as a broken clock, one wonders what value there is in stretching out those assumptions.
But look across the outlooks from some of the top organisations and their inner workings, and you can start to separate ideological angles from data extrapolation and look to build a consensus that is more than the sum—and crass average—of its parts. Long-term forecasts carry more weight than being mere guesstimates about the future as they also impact energy decisions—both at policy and corporate level—in the here and now.
Maybe they are not exactly self-fulfilling prophecies, but they certainly can build momentum for new directions that may have flimsy fundamentals: base-case scenarios and even ideal scenarios may have serious implications for how businesses or governments make energy decisions today. Hence, they can be misleading and can cause years to be wasted on wrong choices, or they can be useful and help accelerate the right moves.
These outlooks also reflect priorities of the moment, the place and the institution: whether it is security, affordability or sustainability. And ‘the moment’ should be the byword for all outlooks as they are invariably tied to the time and place in which they were created. The futuristic visions of 1970s sci-fi films highlight the reality of the time when they were produced just like a look back at 1990s energy forecasts, which had peak supply as their central argument.
This is important when assessing the current crop of long-term outlooks, which have mostly accelerated timelines for peak oil demand amid the building of momentum across electrification and the rise of electric vehicles (EVs), especially in the economic powerhouse of China.
The question is always chicken and egg: how much is planning for changes in demand for, say, oil and gas predicated on the assumptions already baked into oil and gas appetite? If you assume oil demand will fall soon, more may go into the future energies that may replace it, but also maybe less investment will go into oil itself. Acting on these assumptions can be a double-edged sword for matching oil, gas and energy needs with oil, gas and energy supplies.
Our view
Petroleum Economist has taken a look at the outlooks across the IEA, OPEC and some of the big energy organisations and corporations, their strengths and weaknesses, and has come up with our own truly independent and unique view of supply and demand out to 2050.
First off, it should be noted that our outlook is fairly close to a ‘business as usual’ extrapolation. Population, urbanisation, economic growth and government policy are key factors to any long-term outlook. Key unknowns include yet-to-be developed government policies and advances in technology that may influence the cost, pace and potential availability of certain pathways as governments look to achieve climate targets.
What also remains uncertain is how quickly and to what extent businesses and consumers will be willing to pay for deeper carbon reductions in the products and services they use, thereby creating a market that incentivises an accelerated path to the desired net-zero goal.
Petroleum Economist is focused on projection not scenario: the former makes a set of assumptions and extrapolates them to a future point, while the latter works backwards from a hypothetical target and comes up with the steps needed to achieve that outcome. Three things are required: supportive public policy, significant technology advancements and a smooth transition from government subsidies to market-based mechanisms.
But as with the famous Monty Python dead parrot sketch, where the shopkeeper unshakeably tells the customer the parrot is just sleeping despite the obvious, net-zero advocates are similarly blind to the reality. If net zero is a dead parrot, we need to start to redefine our targets and our discussions around energy. That probably needs to begin around the concept of energy justice, given poverty, cost of living, access to energy and reliability of the system are as important as that of reduced emissions, depending on the individual actor involved. A holistic approach to economic and energy systems is crucial.
Clean additions
How cleaner forms of energy interact with traditional fuels has huge consequences for whether they directly replace the older forms of energy, whether they play a bigger role in the energy addition story, how much they end up allowing the dirtiest forms of energy to persist (such as coal and wood) and how much they detract from other ways to reduce emissions, such as efficiency, smarter consumption and more joined-up approaches—and whether these shifts are realistic. After all, if EVs are currently more useful for city driving, would it not it make more sense for policymakers to invest more in public transport and cycling than EVs?
Instead of EVs replacing internal combustion engine cars, they could end up slowing the shift to public transport in cities and drivers reverting to their gas guzzlers for weekends. For example, in Vienna, there is not so much emphasis on EVs, but the city has one of the best public transport networks. There are also the untold consequences of EVs on metals mining— especially copper—which could actually hamper cleaner efforts towards electrification in the Global South.
Make no mistake, rapid growth in wind and solar in the energy mix—a projected fourfold increase by 2050—will spur big changes to the energy landscape. That is an important part of the solution for policymakers depending on the country and to absorb much of the additional demand rather than replace existing use.
Commercial transport and industrial activity alone will account for nearly half of the world’s emissions in 2050. Wind and solar will play a limited role in these sectors. Reducing emissions in ‘hard to decarbonise’ sectors such as aviation, cement, steel and others with unique energy needs will require the world to rely on the expansion of biofuels, CCS and hydrogen, among other technologies.
Nuclear still seems to be the clean option that everybody is scared to accelerate—especially in Europe. Broader-based electrification seems to be a key answer that also has scary prospects hidden away in terms of infrastructure and environmental costs, ugly questions over metals mining—from labour exploitation to metal shortages—and concentration risk and affordability threats if the world delivers on sustainability aims.
Key takeaways
| Hydrocarbons’ share of the primary energy mix will actually increase from 56% now to 60% by 2050 | |
| Coal’s role in energy will collapse to just 10% of the overall share from 27%, while renewables will see rapid growth, especially with wind and solar | |
| 4 | Nuclear and hydrogen may stay on the periphery of the overall energy mix, while energy efficiencies will take on greater importance. |
| By 2050, global primary energy demand will increase by 25%, with Asia-Pacific and Africa leading the growth. Petroleum Economist sees primary energy demand growing from 635EJ in 2023 to 775EJ by 2050 | |
| Asia-Pacific is set to dominate global energy demand growth, contributing 70EJ, followed by Africa, while Europe should continue its gradual decline. | |
| There are three key factors shaping energy demand: growth in petrochemicals; electrification; and a slower, more challenging energy transition. | |
| Fossil fuels are expected to remain dominant in the global primary energy mix, contributing 70% by 2050, down from around 80% in 2023. | |
| Oil is unlikely to peak in the next two decades, and even then it will shift to a plateau while gas growth will continue to rise for the foreseeable future. | |
| 10 | There are, as such, significant risks that supply will not keep up with demand, and huge investment needs to take place to avoid price shocks and material economic damage. |
To read part two of our energy outlook, click here. To read part three, click here.
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