Al-Khobar, Asharq Al-Awsat—Demand for oil will continue to rise for the next 25 years, driven by emerging economies, particularly those from Asia, according to Omar Abdul-Hamid, the director of OPEC’s Research Division.
“News of the end of oil has been exaggerated,” Abdul-Hamid said in a recent interview with an in-house magazine published by Siemens. “We saw on average 91 million barrels of demand every single day in 2014. By 2040 we expect 111 million barrels of demand per day.”
“Demand growth mainly comes from emerging economies and developing countries, particularly in Asia, and from OPEC member states. Their demand more than compensates for shrinking use in highly developed countries,” he said.
He added that OPEC saw that there remained sufficient global oil resources to satisfy the growing demand.
A slew of books, articles and reports have appeared in recent years predicting the decline in the use of oil as the main global energy resource, touting alternative sources such as hydrogen fuel cells and technological innovation as the harbingers of the demise of oil, which such publications predict will suffer the same fate other sources such as coal did at the beginnings of the previous century.
But Abdul-Hamid said he and OPEC were optimistic regarding the future of oil as an energy source.
“It is worth taking a historical perspective. Often new sources of energy complement existing ones. Coal was dominant globally before oil entered the market. But we continue to live with demand for coal even as gas has become a major source of energy. Mankind will keep using a lot of fossil fuels, both near term and long term.”
Conventional oil and gas, and traditional exporters such as Saudi Arabia and other OPEC members, have been challenged in the last few years by production methods such as fracking and the shale oil production boom in the US, which has now helped the country emerge as a heavyweight global exporter of oil.
However, Abdul-Hamid pointed out that such unconventional sources still only accounted for a small proportion of total global oil production.
He said OPEC predicted only 3.8 million barrels per day (bpd) of crude produced through unconventional methods such as fracking—accounting for only 4 percent of global demand.
“This contribution to supplies is also expected to level out in the near future before declining. On an even longer term, and when considering other forms of unconventional supply, by 2020 we expect their total contributions to production to reach approximately 13 million [bpd] under the right conditions,” Abdul-Hamid said.
“However, America will both import and export oil at the same time and continue to use oil from the Middle East for the foreseeable future.”
Exporters from the Middle East such as Saudi Arabia and other OPEC members have also had to weather the recent storm of sharply falling oil prices.
Prices dropped to their lowest levels in years in late 2014 and early 2015, on the back of a heavily oversupplied market due to the shale oil boom and tepid demand from European countries.
Though they have recently rallied slightly to jump the 60-dollar-per-barrel mark, oil prices began a sharp decline last year to eventually reach lows of 45.19 dollars in January, the lowest price since the aftermath of the global financial crisis, after prices had steadied at around 115 dollars in mid-2014.
OPEC defied predictions late last year by keeping its production ceiling of 30 million bpd steady. Observers had expected the global cartel to lower its collective output in a bid to stoke global demand and eventually drive up prices, but OPEC said it wanted to allow the market to recover naturally.
Speaking of the recent price slump, Abdul-Hamid echoed his organization’s general attitude to the market, expressing optimism that prices would eventually rebound once again.
“The industry is cyclical in nature. Changes in oil prices are not new and cost effectiveness will continue to be an important feature. Before the oil price tumbled in late 2014 and early 2015, it maintained high levels for a number of years. This may have bred some degree of complacency.”