Oil outlook to 2020

OPEC's World Energy Model, OWEM, is used to develop the outlook for oil demand and supply to 2020. The reference case assumes world economic growth averaging 3.3 per cent per annum, while OPEC's Reference Basket of seven crudes remains mainly in the target range of US $22–28 a barrel, in nominal terms. With no additional assumed policy measures, for example, to reduce CO2 emissions, the reference case sees world oil demand rising from 76 million barrels a day in 2000 to 89 mb/d in 2010 and 107 mb/d in 2020. More than three‐quarters of this increase comes from developing countries. The most important sector for a demand increase is transportation, accounting for 60 per cent of the rise globally. On the supply side, the oil resource base is not considered a constraint to satisfying this increase in demand. Non‐OPEC production is expected to continue to grow during the current decade, and to stabilise at a level of 53–55 mb/d beyond 2010. OPEC production is projected to reach 36 mb/d by 2010 and 52 mb/d in 2020. It is important, however, to recognise the uncertainties pervading such an assessment. For example, it is not clear how future economic growth, energy policies and technology will develop over this time horizon, and this inevitably clouds any assessment of future oil demand and supply. In an attempt to quantify one aspect of such uncertainty, other feasible economic growth rates have been assumed, the results of which suggest that OPEC output by 2010 could be 4–5 mb/d higher or lower than in the reference case, while the range is clearly even greater in the years to 2020. Moreover, policy reactions to such developments could compound the uncertainty. On the other hand, such alternative economic growth could place pressure upon oil prices to move outside OPEC's price band of $22–28/b. These uncertainties illustrate the scope of the challenges confronting the oil industry, especially given the long lead‐time nature of oil industry investment, in making economically sound investment decisions that are geared to ensuring that sufficient capacity exists. Market stability, at reasonable and sustainable prices, is a key prerequisite for rising to these challenges, and, since market forces alone are not enough to guarantee this, a broad base of cooperative efforts will be needed to increase the chances of meeting this fundamental objective.