The Organization of the Petroleum Exporting Countries (OPEC) has released its first-ever forecast for oil demand in 2025, and it may surprise some analysts and investors. According to OPEC, the world will need more oil in 2025 than it did in 2024, despite the growing popularity of renewable energy sources and electric vehicles.
Why Oil Demand Will Rise in 2025
OPEC expects global oil demand to increase by 1.85 million barrels per day (mbpd) in 2025, reaching 106.21 million bpd. This is higher than the 2.25 mbpd growth projected for 2024, which OPEC left unchanged from its previous report.
The main drivers of this robust demand growth are China and the Middle East, which will account for more than half of the additional oil consumption in 2025. OPEC also anticipates a modest recovery in oil demand from India, which was hit hard by the pandemic in 2023.
OPEC attributes the strong oil demand outlook to several factors, including:
– Higher economic growth. OPEC expects the global economy to expand by 2.8% in 2025, up from 2.6% in 2024, partly due to lower interest rates and fiscal stimulus measures.
– Rising population and urbanization. OPEC forecasts that the world population will grow by 1.1% annually, reaching 8.1 billion people by 2025. More people will live in cities, especially in developing countries, which will boost the demand for transportation and industrial fuels.
– Limited impact of climate policies. OPEC acknowledges that the global efforts to reduce greenhouse gas emissions and promote clean energy will have some effect on oil demand, but not enough to offset the underlying growth factors. OPEC estimates that the share of oil in the global energy mix will decline slightly from 31% in 2024 to 30% in 2025, but remain dominant over other sources.
How OPEC Differs from Other Forecasters
OPEC’s bullish outlook for oil demand in 2025 contrasts with the views of some other prominent forecasters, such as the International Energy Agency (IEA). The IEA, which represents the interests of major oil-consuming countries, predicts that global oil demand will peak by 2030 and decline thereafter, as the world shifts to cleaner and more efficient energy sources.
The IEA also expects oil demand growth to slow down significantly after 2024, reaching only 0.3 mbpd in 2025, compared to OPEC’s 1.85 mbpd. The projections are based on a scenario that assumes more ambitious climate policies and technological innovations, as well as a faster adoption of electric vehicles and renewable energy.
The difference between OPEC and IEA forecasts reflects not only different assumptions and methodologies but also different perspectives and interests. OPEC, as a group of oil-producing countries, has a stake in maintaining a high level of oil demand and prices, while the IEA, as a group of oil-consuming countries, has an interest in reducing oil dependence and emissions.
What This Means for the Oil Market and the Environment
OPEC’s forecast for oil demand in 2025 has implications for both the oil market and the environment. On the one hand, it suggests that the oil market will remain tight and volatile in the next few years, as the supply of oil may struggle to keep up with the demand. This could lead to higher oil prices and revenues for OPEC and other producers, but also higher costs and risks for consumers and businesses.
On the other hand, it implies that the world is not on track to meet the goals of the Paris Agreement, which aims to limit the global temperature rise to well below 2 degrees Celsius above pre-industrial levels. To achieve this, the world would need to cut its oil consumption by more than half by 2050, according to the IEA. OPEC’s forecast, however, indicates that the world is heading in the opposite direction, with oil demand continuing to grow until at least 2025.
Therefore, OPEC’s forecast for oil demand in 2025 poses a challenge for both the oil industry and the global community. It calls for more cooperation and innovation to balance the needs of energy security, economic development, and environmental protection.
Despite the diverging views and interests of OPEC and IEA, there is still room for hope and dialogue. Both organizations have expressed their commitment to support the transition to a low-carbon economy and to work together to address the common challenges of energy and climate.
Moreover, OPEC and IEA have acknowledged the uncertainty and complexity of the future energy landscape, which is influenced by many factors beyond their control, such as the pandemic, geopolitics, consumer behavior, and social trends. Therefore, OPEC and IEA have stressed the need for flexibility and adaptability in their forecasts and policies, as well as the importance of regular monitoring and review of the changing energy dynamics.
By doing so, OPEC and IEA may be able to narrow their gap and find common ground in the quest for a more secure, prosperous, and sustainable energy future.
Source: Reuters
