Key assumptions


2017: road to adjustment

Since the publication of the World Oil Outlook (WOO) 2016 in November last year the market has experienced significant changes that have had an impact on medium- and long-term estimates. This is particularly evident from the supply viewpoint, with OPEC's decisions taken in Algiers (28 September 2016) at the 170th (Extraordinary) Meeting of the OPEC Conference and then in Vienna (30 November 2016) at the 171st Meeting of the OPEC Conference, seeing its Member Countries implement a production adjustment with a target of 32.5 million barrels a day (mb/d) with effect from 1 January 2017. Moreover, the subsequent OPEC and non- OPEC Declaration of Cooperation through the Ministerial Meetings in Vienna (10 December 2016 and 25 May 2017) embraced a production adjustment of 1.2 mb/d for OPEC, together with a production adjustment of around 0.6 mb/d from participating non-OPEC producing countries. The decisions were focused on accelerating the ongoing drawdown of the stock overhang, which is now well underway, as a means to help bring the oil market rebalancing forward.

The world is experiencing an era of demographic change

Future developments in energy and oil markets will be driven by number of factors. The critical ones include population growth, changing demographics, the assumed path of economic
growth, policy changes, technology advancements and energy and oil prices. For population growth, this is expected to expand at an unprecedented low rate compared to the previous
century. Moreover, the growth rate is anticipated to see a further deceleration as the outlook moves to 2040. At the same time, the world continues to age as fertility rates decline and people live longer across the world. In addition, more people are moving from country-to-country, as well as increasingly to urban areas.

Global population is estimated to increase from 7.3 billion in 2015 to 9.2 billion in 2040. The additional 1.8 billion people will mainly come from Developing countries. In the Organization for Economic Co-operation and Development (OECD) region, population is forecast to increase by 116 million people in the period to 2040 partly supported by immigration. The share of the global working age population (that is, individuals aged between 15 and 64 years) peaked in 2012, following a steady increase since 1970. Individuals aged 65 or more are anticipated to account for 14% of the world population in 2040, up from today's level of 8%. Children are estimated to represent 22% of the population by 2040, down from 26% today.

Long-term economic growth will be driven by Developing countries, with growth in the OECD constrained by weaker demographics

Against this background, in the Reference Case, global gross domestic product (GDP) between 2016 and 2040 is expected to increase at an average rate of 3.5% p.a. Most of the global growth will be driven by the Developing countries, which on average are expected to grow by 4.5% p.a. during this period on the back of higher labour productivity growth and a more optimistic demographic outlook.

The global economic picture will change in the long-term

The size of the global economy in 2040 is estimated to be 226% that of 2016. Developing countries are estimated to account for three-quarters of the global GDP growth over the forecast
period. Furthermore, one of every two additional $ (2011 purchasing power parity (PPP)) of GDP is expected to come from China and India.

In 2016, OECD America accounted for 20% of global GDP, OECD Europe and China were both at 18%, and India was at 7%. By 2040 the share of OECD America is anticipated to drop to 16% and that of OECD Europe to 12%. On the other hand, China's contribution to the global economy is forecast to increase to 23%. Even more remarkable is the case of India. Its weight in terms of global GDP is expected to increase to 16%.

Energy policies and technological development drive energy efficiency and emission reductions

The evolution of energy markets over time is significantly impacted by government policies, which are used as mechanisms to stimulate change beyond purely market-driven forces. The current trend is expected to lead toward a long-term global convergence that focuses on energy efficiency and the increased adoption of clean modes of energy, including renewables. Moreover, policies are also expected in terms of energy poverty eradication measures in developing countries.

Among the visible long-term global energy policy trends is the increasing penetration of electric vehicles (EVs), the tightening of fuel emissions standards, and the desulphurization in the
road transportation, marine and aviation sectors.

Technology will continue to shape the energy industry as a whole, and the oil industry, in particular

It can be expected that technical advancements will continue to evolve and change the future energy panorama. For example, the current development of renewable energies and the of
introduction of EVs as a replacement for ICE vehicles are strong signs of trends. Elsewhere, highly resistant fibres in conjunction with oil-based resins are already replacing traditional
metal-based materials in the case of latest-generation airplanes, to highlight another state-of-the-art development. And in the field of oil discovery and exploration, technical development
has always played a decisive role since early onshore drilling, through the large-scale development of offshore and, today, tight oil reserves.

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