The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. The scenarios are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition.
Growing global momentum could accelerate the energy transition, as demonstrated by the UAE Consensus, released in December 2023, that calls on Parties to make a just and orderly transition away from fossil fuels. Nevertheless, analysis from multiple sources, including the IEA, IPCC, and McKinsey, suggests that conventional fossil fuels are likely to remain a part of the energy mix to 2050, even in a 1.5° pathway, and may act as a bridge for an orderly transition. Therefore, decarbonizing the fossil fuel system and substantially reducing emissions, including methane, is a key area of focus. Within that evolving context, this article examines the potential road ahead for oil according to our sector-based adoption models. To view our natural gas outlook, please visit Global Energy Perspective 2023: Natural gas outlook.
About the Global Energy Perspective 2023
The energy transition is expected to change the trajectory of global oil demand. According to our analysis,1 demand could fall by up to 50 percent by 2050, depending on the scenario modelled. However, even under the most accelerated scenario, the analysis shows that investment in a broad energy mix, including oil and gas, would continue for a period in order to shore-up security of supply and meet demand across the range of scenarios, particularly in end-use sectors such as chemicals, aviation, and heavy trucking. As a result, our bottom-up energy transition scenarios consistently see a certain amount of new field development continuing in order to meet overall energy demand, offset rapid production declines, and to meet transition energy shortfalls. Furthermore, our scenarios see investment in the oil and gas sector, both for fuel and non-fuel purposes, remaining robust through 2030 as the world navigates an orderly and affordable transition.
As the transition gathers pace and oil demand drops, the supply mix may continue to evolve
At the beginning of the COVID-19 pandemic, lowered demand caused oil prices to decline, even to below zero, and prices remained below $50 per barrel for most of 2020.2 Since then, in line with the post-COVID socio-economic recovery, oil prices have climbed significantly, hovering around $80 per barrel for the majority of 2023.
In parallel, a new wave of capital expenditure has been seen from multiple oil and gas companies.3 However, with all energy transition scenarios projecting peak demand by 2030, the sector may need to evaluate how much additional supply, if any, is needed to meet demand.
Under the Current Trajectory scenario’s sector adoption assumptions, both national and independent exploration and production companies will actively develop new resources, and even more so under the Fading Momentum scenario, which assumes that frontier exploration and a more efficient use of the existing production base will be used to meet demand.
Under the Further Acceleration scenario’s sector adoption assumptions, a larger share of the shrinking market could be taken up by low-cost, Middle Eastern OPEC producers by the mid-2030s. This would happen even sooner under the Achieved Commitments scenario assumptions.
For any new capital expenditure in oil, parties will need to consider actions to enable a just and orderly transition away from fossil fuels in the coming decades and accelerate efforts globally towards net zero-emission energy systems, utilizing zero- and low-carbon fuels well before or by around mid-century.
Given the fact that it accounts for around 10 percent of global greenhouse gas emissions, the oil and gas industry can play an important role in reducing emissions, mostly notably in methane reduction, which represents around 45 percent of all oil and gas emissions globally and generates a temperature impact that is 80 times higher than CO2 over a 20-year timeframe.4 There has recently been acceleration in this area; for example, the Oil and Gas Decarbonization Charter (OGDC), launched at COP28 in December 2023, commits signatories to achieving net-zero operations by 2050 across Scope one and two emissions, near-zero methane in upstream operations by 2030, and zero routine flaring by 2030.
To request access to the data and analytics related to our Oil outlook, or to speak to our team, please contact us.