If the world acts decisively to limit global warming to 2 degrees Celsius by 2050, the scale of change would revolutionize the energy industry, according to research and global natural resources consultancy group Wood Mackenzie on Thursday.
The group explained that progressive electrification would squeeze the most polluting hydrocarbons out of the energy mix, nearly eliminating their markets.
As a result, oil demand would shrink, and with it, so would the power of major oil producers. Gas demand, however, would remain resilient but business models will need to evolve to a low-carbon world, the consultancy said.
Gas and LNG sellers need to focus on low-cost, low-carbon supply and carbon dioxide emission reductions as carbon prices increase, it said.
Commenting on the data, Ann-Louise Hittle, vice president of Macro Oils, at Wood Mackenzie, said that Wood Mackenzie's Accelerated Energy Transition Scenario, AET-2, indicates how energy demand, supply and pricing will change if policy and technology are rapidly deployed to cut greenhouse gas emissions in line with the Paris Agreement.
She said that "If we move to keep global warming to the 2°C limit set by the Paris Agreement, the energy matrix will change – and change profoundly," and added that Wood Mackenzie's AET-2 scenario is a scenario, not our base-case forecast, It is one interpretation of how the Paris Agreement could be achieved, based on our fundamental analysis across the natural resource sectors.
"Under WoodMac's AET-2 scenario, oil demand will drop significantly, and with it, oil prices. OPEC has an oil-market share of more than 50% by 2050, but less control," she underlined. She said that consequently, oil prices would begin to slip later this decade.
By 2030, under the AET-2 scenario, Wood Mackenzie expects Brent to average $40 per barrel, down from the current $60 to $70 per barrel, and by 2050, it forecasts that Brent could slide to between $10 and $18 per barrel.
By Gulsen Cagatay