What goes up must come down.
Or as it goes the world of oil and gas demand forecasts: what goes down, must come up.
In a reversal of pandemic-era downward revisions to forecasted long-term oil and gas demand, OPEC now sees oil demand at 105 barrels per day in 2025, then increasing for the rest of the decade to about 108.5 million barrels per day in 2030, and continuing to rise steadily next decade before plateauing at nearly 110 million barrels per day in 2040.
This is significantly higher than OPEC’s 2021 forecast, which was 103 million barrels per day in 2025, increasing for the rest of the decade to about 106.5 million barrels per day in 2030, and increasing throughout the 2030s before plateauing at just a shave over 108 million barrels per day in 2040.
This is also a lot higher than what a lot of experts had predicted just a year or two ago. Some oil companies and consultancies, such as Equinor and Bernstein energy had peak oil and gas demand as early as 2025. BP, at one point during the pandemic, stated oil demand peaked in 2019.
In their report, OPEC concludes that the oil and gas industry will need to invest $12.1 trillion dollars by 2045 just to keep up with demand and stay on the safe side when it comes to energy security concerns.
OPEC also recently argued that oil should be part of the oil transition and that the focus by investors on environmental, social, and governance issues has worsened an investment shortfall in the sector.
In terms of overall energy consumption, the United States Energy Information Administration predicts that will increase by 47% by 2050, with renewables still only making up about one-quarter of that demand.
In short, the upward revision in demand forecasts doesn’t surprise us, crude oil demand has been increasing nearly every year since 2006, with growth in developing-market economies in Asia, especially, fueling that increase. In 2022, worldwide energy investment is set to increase by 8% as many countries are investing in their energy supplies because of security threats.
What does this mean for investing in oil and gas partnerships?
It means business as usual, despite all the noise. And that’s a good thing.
Just as demand has been increasing for decades, so too have profits for many investors in joint-venture partnerships in domestic oil and gas production.
But high oil demand for many years is just one part of the story. Improvements in exploration technology have made investing in these types of projects less risky, and this technological advancement as the potential to offset higher costs. Speaking of risk, oil and gas partnerships help provide investors a hedge against the ups and downs of the stock market. Oil and gas wells are hard investments that aren’t correlated with the price of stocks or bonds, even energy stocks and funds.
Furthermore, investors who have been searching for yield are often more than satisfied at the monthly high annualized returns on their investments (ROI) that can outpace almost any other investment. There’s a reason why major private equity firms have invested hundreds of billions of dollars in the oil and gas industry.
