A further decline in oil prices this year, in the face of geopolitical tensions and threats the coronavirus poses to growth, is making that task even harder. Should global oil demand trend downward before those plans take root, the countries would have to cope with their longer-term economic problems even sooner, according to the fund.
“The world’s demand for oil is expected to grow more slowly and eventually begin to decline in the next two decades,” the IMF said.
Global oil demand is likely to peak around 2041 at about 115 million barrels a day and gradually decline from there, according to the report. While that forecast is firmly in line with most industry estimates, some, including the IMF, see potential for oil use to permanently decline even earlier.
Saudi Aramco, citing forecasts from oil industry consultant IHS Markit Ltd., said in its initial public offering prospectus last year that oil demand could peak around 2035. Improved energy efficiency or the imposition of a carbon tax by governments worldwide could bring oil’s demand peak forward to as soon as 2030, the IMF said.
Saudi Arabia, the U.A.E. and Kuwait are the biggest producers in the GCC and are all OPEC members. Risks differ for the GCC states, which also include Qatar, Oman and Bahrain.
The IMF’s outlook offers a broad timeframe in which global oil demand might crest. Revenue may not peak until the middle of the century and Gulf producers could see demand for their oil sustained from other quarters.
Increased use of oil for petrochemicals might help mitigate the slowdown in demand, the IMF said. Even as oil demand peaks, the lower costs of production will allow Gulf states to gain market share over rivals elsewhere.
Even then, under the IMF’s scenario, Saudi Arabia, the U.A.E. and their neighbors face a future of slumping income and reliance on debt to support spending.
“Faster progress with economic diversification and private sector development will be critical to ensure sustainable growth,” the IMF said.
This article was provided by Bloomberg News.