OPEC Says Despite Push For Alternative And Renewable Energy, Oil Will Be World's Primary Energy Source

by Bhaswati Guha Majumder - Sep 29, 2021 08:27 AM
OPEC Says Despite Push For Alternative And Renewable Energy, Oil Will Be World's Primary Energy Source Oil tanks.
Snapshot
  • According to OPEC, the energy demands of developing economies in other regions of the world will keep oil as the world's top energy source until 2045.

    According to OPEC's 2021 World Oil Outlook, oil consumption will climb by 1.7 million barrels per day (bpd) to 101.6 million bpd in 2023, putting demand back beyond the pre-pandemic 2019 rate.

While countries and several private companies are investing tons of money in exploring eco-friendly alternatives like renewable energy, the Organization of the Petroleum Exporting Countries or OPEC, has reminded the world that crude oil will remain the primary source of energy for decades, especially as the world's poorer countries pursue better development and living standards.

The international oil cartel said that the increased use of electric cars on the road, as well as the drive for alternative and renewable energy, would usher in a period of falling oil consumption in wealthy countries. But according to OPEC, the energy demands of developing economies in other regions of the world will keep oil as the world's top energy source until 2045.

In its annual World Oil Outlook, OPEC noted: "What is clear in this year's WOO is that energy and oil demand have picked up significantly in 2021, after the massive drop in 2020, and continued expansion is forecast for the longer-term."

Additionally, OPEC claimed that as nations recover from the Covid-19 pandemic, oil consumption will skyrocket in the following years. It contrasts with that of the International Energy Agency, which stated in a May report that new oil projects should not be funded if the world is to achieve net-zero emissions.

Oil Demand

According to OPEC's 2021 World Oil Outlook, oil consumption will climb by 1.7 million barrels per day (bpd) to 101.6 million bpd in 2023, adding to the robust growth already forecast for 2021 and 2022, and putting demand back beyond the pre-pandemic 2019 rate.

As claimed, between 2020 and 2045, global primary energy consumption is predicted to grow by 28 per cent, with all fuels required, owing to a projected doubling of the global economy and the addition of roughly 1.7 billion people globally.

Only coal will be used less, while other energy sources will experience increased demand, albeit the proportion of renewables, nuclear, and natural gas will increase, according to OPEC.

As attempts to combat climate change take hold in the form of renewables, as well as alternative fuels in automobiles, aircraft and ships, the study depicts a future of falling demand for oil in wealthier nations that belong to the 38-member Organization for Economic Development and Cooperation. OPEC also believes that by the conclusion of the report's time frame in 2045, the global vehicle fleet would have grown by 1.1 billion to 2.6 billion, with 500 million electric cars accounting for 20 per cent of all vehicles.

However, growing populations and expanding middle classes in the rest of the world, particularly China and India, will result in higher demand for oil between 2020 and 2045, according to a report released by OPEC's secretariat in Vienna. However, the governments in both countries have been taking several initiatives to promote climate-friendly alternatives to achieve their carbon emission goals.

By 2045, oil will meet 28.1 per cent of global energy demand, down from 30 per cent in 2020, but ahead of natural gas (24.4 per cent) and coal (17.4 per cent). The rest is made up of hydroelectric, nuclear and biomass energy sources, as well as other renewables like wind and solar.

Demography, or the smaller and ageing populations that accompany reduced economic development, was highlighted as a primary driver for declining energy demand in the more developed countries. According to the 340-page report, rising awareness of the need to expedite climate change action has resulted in new policy objectives to achieve net-zero emissions by 2050.

Even though the European Union, the United States, Japan, Canada, Brazil and the United Kingdom have all suggested new goals and roadmaps, OPEC, on the other hand, expressed serious doubts about whether all of these aggressive climate-change promises will be reached within the planned period.

For example, the European Union announced its “Fit for 55” package in July, in which the 27-country bloc pledged to reduce emissions by 55 per cent by 2030 compared to 1990 levels. The package outlines a historically ambitious set of goals and strategies to be implemented by 2030. The revision and strengthening of EU Emissions Trading System (ETS) targets and carbon pricing signals in line with the projected 2030 ambitions is a major component.

But OPEC noted that it is still just a plan that needs to be debated and agreed upon by all EU Member States, with plenty of room for exceptions and watering down.

However, the organisation claimed that demand for OPEC's oil is expected to rise in the coming years, but increased supply from the United States and other outside suppliers means OPEC output in 2026 would likely be 34.1 million bpd, down from 2019.

After years of anticipating growth, the group finally admitted last year that demand would eventually peak. The demand prediction for 2045 has been lowered to 108.2 million bpd, down 900,000 bpd from last year.

OPEC is optimistic about its future prospects, expecting its market share to grow in the next decades as competition from non-OPEC producers fades.

Top Explorers Of Alternatives

Countries all across the world are adopting solar, wind, geothermal and other renewable energy sources to achieve a low-carbon future.

This list of leading countries in this climate-friendly initiative includes names like Sweden, Costa Rica, Germany, Denmark, China, the United States and others.

According to Climate Council, in 2015 Sweden announced that it will eliminate fossil fuels from electricity generation by 2040. The country with over 10 million population also said that it has ramped up investment in solar, wind, energy storage and clean transport while aiming to become the first 100 per cent renewable country.

The Central American country Costa Rica, which has more than five million population, has produced over 98 per cent of its electricity from hydro, geothermal, solar and wind over the past few years. The current government is taking several initiatives toward achieving carbon neutrality by 2021. Even a law was passed requiring that a minimum of 10 per cent of government-owned transportation vehicles be replaced with renewable energy powered vehicles.

Nicaragua is diversifying its energy industry by increasing the use of renewable energy. Sugarcane biofuel, which accounts for 33.2 per cent of Nicaragua's renewable energy sector, produces a large portion of the country's renewable energy.

Geothermal energy is the second most popular renewable energy source, accounting for 24.6 per cent, followed by wind energy at 22.5 per cent. Solar energy, at 0.5 per cent, and hydroelectric energy, at 0.25 per cent, are the least utilised renewable energy sources in the country.

According to the latest reports, in the first three quarters of 2021, renewables will account for 43 per cent of electricity consumption in Germany, while the South American country Uruguay has become one of the world's major producers of renewable energy, with hydropower accounting for 60 per cent of total generation and the rest coming from wind, solar, and biofuels. Uruguay is also one of the most electrified countries in the hemisphere, with electricity in 99.9 per cent of houses.

In terms of Kenya, in its overall power development plan for the period between 2017 and 2037, the government aimed to increase renewable energy generation. Renewable energy sources are expected to generate over 60 per cent of the country's installed power capacity by 2037.

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