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Motorists line up for gas on the first day of gas rationing imposed on nine California counties  following the 1979 revolution in Iran that caused a shortage of crude oil.

Bettmann Archive In the past couple of years, arguments and predictions have abounded to the effect that climate change policies and technological advances will lead to a peak in oil demand, possibly in the near future. While some of these predictions are based on aggressive assumptions about the adoption of electric vehicles, others are more prescriptive, suggesting what must be done to accomplish greenhouse gas reduction goals. Foremost among these has been the IEA’s NetZero2050 Scenario, which suggests that all new upstream investment by the oil industry needs to stop, and existing production allowed to decline naturally.

Additionally, pressure from activist investors on the oil industry (among others) might curtail both companies’ desire to invest in production but also discourage the financial sector from providing needed capital. Further, the possibility that oil prices would fall with falling demand will mean that the more expensive supply, such as U.S. shale oil, will become uneconomic. The figure below shows how the IEA projects that in its NetZero2050 Scenario, the oil price would be 70% lower in 2050 than in the Stated Policies Scenario.

Price Assumptions in Different IEA Scenarios

The author from IEA data. Even taking the more moderate SDS, oil demand is projected to fall by 50 mb/d by 2050, which is already somewhat extreme. More important, and overlooked by the IEA, is that the reduction would be heavily concentrated among Western, privately-owned oil companies. The figure below shows the projection for OPEC’s market share in the three scenarios in the 2021 World Energy Outlook, and there is only slow growth in the next three decades.

OPEC Market Share in IEA Scenarios

The author from IEA data MORE FOR YOUHere’s The List Of 317 Wind Energy Rejections The Sierra Club Doesn’t Want You To SeeRevisiting The Blame For High Gas PricesWhy Do ‘Fracking’ Opponents Ignore Its Moral Benefits? In a new report to be released by the Energy Policy Research Foundation (EPRINC.org), I have applied oil field depletion rates to the primary producing areas outside the OPEC+ nations under two assumptions. First, the private sector reduces upstream investment gradually to zero by 2040, in which case production in those areas would drop by about 20 mb/d by 2040. Alternatively, assuming upstream production outside of OPEC+ stops next year, as the IEA suggests would be necessary to achieve its NetZero2050 goals, production from areas outside of OPEC+ would drop by about 25 mb/d by 2040.

There is at this point no sign that any state owned oil companies, whether in OPEC+ or China and India, are going to cut back oil production, so I have assumed that the rest of oil demand in 2040 will be met by them. This means that the market share for OPEC+ will grow massively, reaching between 75% and 83% in 2040, from 57% in 2020, as the figure shows. Should oil demand be higher then naturally their market share will also be higher.

OPEC+ Market Share Forecasts

The author In past oil supply disruptions, private oil companies played a major role in balancing the losses, sometimes even resisting pressure from their home countries for preferential treatment. However, in this scenario, nearly all oil produced would be in the hands of state owned companies, including those in China. While some of those companies will be based in nations friendly to the West., such as Kuwait, Saudi Arabia and the U.A.E., much of it will be from countries like Iran, Iraq, Mexico, Russia and Venezuela which might be less inclined to shift scarce oil supplies to Western countries during an oil crisis.

Further, a greater concentration of production in countries like Iran and Russia could mean that any political unrest will have relatively more impact on the market than in the past. While the West might be using less oil, recent supply chain problems have demonstrated how vulnerable the global economy is to problems that are national rather than global. Spiking oil prices in mineral producing countries could trigger political unrest that could then reverberate around the world. And in 1979, nations like Britain and Canada that were not significant oil importers, suffered recession along with the rest of the world