The gap between the highest and lowest forecast scenarios for oil demand in 2050 has widened to a size greater than today’s entire oil market, according to the newly released IEF RFF Outlooks Comparison Report.
The report, published by the International Energy Forum (IEF) and Resources for the Future (RFF), compares several energy market outlooks prepared by the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) using various modelling techniques. It places them in the context of outlooks produced by other institutions such as the International Renewable Energy Agency (IRENA), and the Gas Exporting Countries Forum (GECF).
“With each year, outlooks diverge more sharply from current market realities, under pressure to project alignment with both climate and energy access targets against a backdrop of increasing prices and volatility in global energy markets,” said Joseph McMonigle, Secretary General of the IEF.
Of the scenarios compared, most “Paris Aligned” outlooks envision a world in which primary energy demand in 2050 will be below 2020 levels, reflecting a major change in the historical relationship between economic growth and energy demand.
“This giant gap between high and low case energy scenarios creates enormous uncertainties for investors and companies that must make capital allocation decisions as well as policymakers that develop energy roadmaps,” Mr McMonigle said.
Outlooks comparisons have become significantly more complex in recent years, with a broad global consensus on the need to reach “net zero” carbon emissions by mid-century and achieve universal energy access by 2030. There is uncertainty over the future role of fossil fuels that now constitute 80 percent of primary energy supply and the speed at which an alternative replacement fuel will become available and other technologies will grow.
The report highlights ever-wider variations between the highest and lowest projections for liquid demand by 2050. The demand “gap” between OPEC’s High GDP Growth Case and the IEA’s Net Zero Emissions (NZE) Scenario rises to 84.6 million barrels per day (mb/d) in 2045.
In the most extreme scenarios – the highest scenario of the US Energy Information Agency (EIA Reference) and the lowest scenario from IRENA (IRENA 1.5°C), the difference skyrockets to 105 mb/d – larger than the size of the entire global oil market today.
“The fact that this gap has grown every year demonstrates that we are moving further away from our goals with every year that passes. Quite simply, we are not on track and must intensify dialogue, including on the assumptions and constraints that govern outlook projections which shape decisions and public perceptions,” said Mr McMonigle.
Significant uncertainties remain regarding policy and technological development, which will play important roles in shaping the pace of demand growth as well as the composition of the fuel mix, the report says.
Mr McMonigle said technology advancements would likely hold the key to achieving climate goals and keeping the world well supplied with reliable, clean and affordable energy. Yet many scenarios understate the role of certain technologies. The role of Carbon Capture Utilization and Storage fails to reach its full potential in many scenarios, contrary to assessments by the Intergovernmental Panel on Climate Change and the IEF.
“Innovation holds the key to getting the world on track to meet our shared goals. Technology breakthroughs and valid assumptions can close the gap in the outlooks and strengthen the stability of energy markets to the benefit of all,” Mr McMonigle said. The findings of the IEF-RFF Outlooks Comparisons Report will be presented at the 12th IEA-IEF-OPEC Symposium hosted by the IEF at its headquarters in Riyadh on Wednesday 16 February, which is livestreamed to the public.
Mr McMonigle praised the IEF’s partner organizations for their work in improving the comparability of data sets and urged IEF Ministers to ensure agencies accelerate work on aligning conventions and techniques that outlooks are based on and to make all data public.
“Peer review will bolster the global energy dialogue and improve policy and investment decisions to address challenges regarding energy security, market stability and just and orderly transitions as called for by the G20 Leaders in Rome in October 2021,” he said.