A Derek pumps in an oil field in Kuwait near the Saudi Arabian border.
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LONDON – Oil prices could drop to just $ 10 a barrel by 2050 if the world manages to electrify the energy market and meet the goals of the Paris Agreement, a consultancy said Thursday.
Energy research and consultancy Wood Mackenzie said in a report that oil demand would drop “significantly” if world leaders acted decisively to limit global warming to 2 degrees Celsius by 2050, as in the landmark Paris Climate Agreement is set.
Wood Mackenzie said that as part of his accelerated energy transition scenario, the energy market would become increasingly electrified by 2050, squeezing out the most polluting hydrocarbons like oil.
In this scenario, oil demand could fall 70% from current levels by 2050, the report said.
Wood Mackenzie predicted that demand for oil in this scenario would begin to decline from 2023 onwards, and that decline would accelerate rapidly thereafter, with the decline going down by around 2 million barrels per day from the previous year.
According to the report, the price of oil could “slide forever” with the international benchmark for Brent crude falling to $ 37-42 a barrel by 2030.
Brent crude oil futures traded at $ 66.29 a barrel during morning trading in London, down around 0.4%.
According to Wood Mackenzie, oil prices could drop to $ 28 to $ 32 a barrel by 2040 before falling to $ 10 to $ 18 a barrel in 2050.
Big Oil “can’t afford to be complacent”
Almost 200 countries ratified the Paris Climate Agreement in 2015 and agreed to limit the temperature rise of the planet to “far below” 2 degrees Celsius above pre-industrial levels and to limit the temperature rise to 1.5 degrees Celsius. It remains a priority ahead of COP26, although some climate researchers now believe that it is already “practically impossible” to achieve the latter goal.
However, a United Nations analysis published on February 26 found that the commitments made by countries around the world to curb greenhouse gas emissions were “very far” from the deep-seated measures needed to experience the most devastating effects of the collapse of climate change avoid.
Ann-Louise Hittle, vice president of macro-oils at Wood Mackenzie, said the consultancy’s report was more of a scenario than a “base case forecast.”
“Even so, the oil and gas industry cannot afford to be complacent,” she added. “The risks associated with robust climate policies and rapidly changing technology are too great.”
– CNBC’s Sam Meredith contributed to this report.