A tricky balancing act ahead for oil in the new few decades

OPEC says that US$10 trillion worth of investment will need to flow into oil and gas through 2040 in order to meet the world's energy needs.

The Organisation of the Petroleum Exporting Countries published its World Oil Outlook 2015 (WOO) in late December, which struck a much more pessimistic note on the state of oil markets than in the past. On the one hand, OPEC does not see oil prices returning to triple-digit territory within the next 25 years, a strikingly bearish conclusion. The group expects oil prices to rise by an average of about US$5 per year over the course of this decade, only reaching US$80 per barrel in 2020. From there, it sees oil prices rising slowly, hitting US$95 per barrel in 2040.

Long-term projections are notoriously inaccurate, and oil prices are impossible to predict only a few years out, let alone a few decades from now. Priced modelling involves an array of variables, and slight alterations in certain assumptions - such as global GDP or the pace of population growth - can lead to dramatically different conclusions. So the estimates should be taken only as a reference case rather than a serious attempt at predicting crude prices in 25 years. Nevertheless, the conclusion suggests that OPEC believes there will be adequate supply for quite a long time, enough to prevent a return of the price spikes seen in recent years.