1.1 Prospects for prices to 2035
In their 2012 Oil Market Outlook the International Energy Agency (IEA) predicted a
continuation of the long-term increase in demand for oil. In its ‘current policies’ (business as
usual) demand increases from 87 million barrels/day (mb/d) in 2010 to 109 mb/d in 2035.
the growth over this period is outside the OECD, particularly China, India and the Middle
East. The model used produces energy prices in the future. These are not forecasts per se,
but the level prices would need to reach in order that there is enough investment in new
production to meet the growing demand. Real oil prices in the ‘current policies’ scenario are
expected to increase to $128 per barrel in 2020 and $145 in 2035. In cash terms these prices
are equivalent to around $160 per barrel in 2020 and $250 per barrel in 2035.
In contrast to this the IEA’s Medium Term Oil Market Report 2013 expects slightly lower
levels of demand than previously forecast due initially to subdued economic growth and later
to improvements in efficiency and fuel switching. Non-OPEC supply forecasts have been
revised upwards due to higher expected production from North America. The IEA use data
from the futures market to as a source of price assumptions over the period covered by this
report (to 2018). These suggest gradual falls in average import prices of oil from around
$109 per barrel in 2013 to $93 per barrel in 2017. The US Energy Information Administration
projects a similar scale of price reductions with average Brent crude prices falling to £100 per
barrel in 2014.
2 Price trends
2.1 Daily prices
The spot price is the price for oil or oil products for immediate delivery. The future price is the
price for purchase at a quantity and quality agreed in advance for delivery on a future
specified date (for example, the future price fixed on 17 February was for delivery in April).
The chart below shows the daily future price of Brent crude from summer 1999 onwards.
The demand in the ‘450 scenario’ –where action is taken to stabilised atmospheric concentrations of
greenhouse gases at 450 ppm CO
equivalent- is still above 2011 levels in 2020, before falling to 2035.
Compared to the ‘current policies’ scenario it is 6% lower in 2020 and 27% lower in 2035. Demand in the ‘new
policies’ scenario – which takes account of the broad commitments and plans that have been announced
around the world, including pledges to reduce greenhouse gas emissions, even where the measures to
implement them have yet to be identified or announced- is 2% lower than ‘current policies’ in 2020 and 8%
lower in 2035.
Oil prices in the ‘new policies’ scenario are forecast to increase much more gradually to $125 per barrel (in
2011 prices) in 2035. Prices in the 450 scenario are predicted to remain broadly flat in cash terms and hence
fall in real terms, reaching $100 per barrel (in 2011 prices) by 2035.
World Energy Outlook 2012, IEA. Table 1.4
Short Term Energy Outlook, August 2013, EIA