The drilling rig "Rowan Viking" during well drilling on Edvard Grieg field, Utsira High area in the central North Sea.
The drilling rig “Rowan Viking” during well drilling on Edvard Grieg field, Utsira High area in the central North Sea. Photo: Øyvind Knoph Askeland, Norwegian Oil Industry Association / Wikimedia Commons.

Energy planners are in the middle of a major debate about the future of the world oil market. One of the most urgent topics is about when and whether oil prices – which dropped by nearly half in 2014 – will recover. Many have put faith in the decision by the Organization of Petroleum Exporting States (OPEC) to attempt to regain price control through supply cuts.

But those cuts have yet to have much effect. Brent crude prices are about exactly where they were a year ago – around US$50 per barrel. In the meantime, oil investment and profits are down.

In the longer term, future oil prices will depend less on OPEC behaviour than on global oil demand. Oil investors use demand forecasts to guide capital investments, not just to respond to expected to growth but to make up for depletion of existing fields. But oil demand is now facing large uncertainties, including two unprecedented challenges. Could the surge in electric vehicle sales lead to oil demand peaking much sooner than expected? And the will Paris Agreement, which strengthened the global climate goal to keep warming “well below 2C”, lead to policies and investments that further erode the market for oil?

The debate over future oil demand is especially relevant for Norway. The oil and gas sector accounts for about one-fifth of Norway’s GDP, and two-thirds of its exports. How the future oil market evolves may have profound consequences for Norway’s economy and communities.

Source: Climate Home, UK