The oil industry is no stranger to decline.
But next time it could be permanent. The oil industry has gritted its teeth and suffered through the past few years, emerging with heads held high and looking to the future. But disruption lies ahead; a daunting prospect for buyers and sellers alike. We have already witnessed the rise of renewable energy which has brought about a shift in the market. So what does all this change mean for oil demand and the future of the industry?
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Watch our senior analysts share their long-term views on peak oil demand:
How will peak oil demand affect the upstream industry?
With demand for oil in developed countries slated to begin a permanent decline by 2020, we expect to see the upstream industry become even smaller and more efficient. Operators have already begun to move away from high-cost, high-risk frontier plays, consolidating their positions and focusing on better-understood basins and near-field opportunities. Higher oil prices will be needed to ensure new development as tight oil growth runs its course, or else operators will need to rely on further cost deflation, project optimization and changing fiscal terms to keep projects competitive.
Ann-Louise Hittle, Vice President – Research, Macro Oils, and Douglas Thyne, Senior Research Manager – Global Oil Supply, sat down and shared their thoughts on how peak oil demand will affect OPEC and upstream as a whole.
OPEC members aren't likely to see their revenues or market share significantly affected by slowing demand growth until 2035 and OPEC will need to increase its production capacity to meet demand. Those OPEC producers with rising production can expect higher oil revenues over the next decade as their market share rises - the result of increasing prices and a tightening supply and demand balance, as non-OPEC supply plateaus by 2026. However, in a challenge for OPEC producers, at the same time, they cannot ignore the prospect of peak oil demand. Where possible, some OPEC nations are preparing for a future with less dependence on oil demand.