What will the price of oil be in 2023?
Moreover, how about 2030?
Oil prices reached a 14-year high point in March.
Prices fluctuated over the past few months and currently still sit near their highest levels. The reasons behind oil prices’ changes are complicated, but the main trigger of this significant increase of oil price is the supply shortage caused by the war between Russia and Ukraine.
The question is whether oil prices will continue to rise in the future.
From the supply side, after the US banned imports of Russian oil, the EU is also going to block most Russian oil imports by the end of 2022. Russian comprised 24.8% of EU’s oil’s imports. Those sanctions will decrease the total supply of oil, which will further deteriorate the supply shortage. However, the sanctions’ influence on oil price largely depends on the condition of Russia and Ukraine’s war. While it is hard to predict the trend of the war, it is not likely for the war to last for years. Therefore, after the war ends, it is reasonable to believe Russia’s oil export level will come back to normal in 2030. This does not suggest that oil price will decrease significantly. Because Russia also has an agreement on oil’s production with OPEC, which aims to keep the oil price above 60 dollars.
From the demand side, China, as the second largest importer of crude oil, started enforcing a lock-down policy in Shanghai and Beijing in March and April, which decreased the global demand of crude oil. From now, there is no signal of China’s government terminating the Zero-Covid policy. So, lockdowns might appear again in the future, which will further decrease the demand for crude oil. Moreover, the shift from gasoline cars to EV cars is also going to dent the oil consumption. In 2021, the worldwide electric car sales totaled 4.2 million, which is an increase of 108% compared to 2020.
The increase of electric cars is taking over shares of total vehicle sales.
According to Bloomberg Research, EVs of all types, including buses and 2- and 3- wheelers, were displacing more than a million barrels of oil demand per day – and that was analysis done before 2021’s surge in EV sales. According to the same research, by the middle of the century, oil demand could be 21 million barrels less per day due to EVs, compared to a market consisting entirely of internal combustion engines. However, the takeover process may happen at a slow pace. Since there are more than one billion cars on the road, and most of them are reliable and long-lived. Those vehicles will continue to consume gasoline. As a result, the demand for crude oil will gradually decrease due to the takeover of EV cars.
To sum up, the war between Russia and Ukraine has caused a short-term supply shortage in the current market. However, it is likely that the war will end before 2030, which helps the oil supply come back to a normal level. On the demand side, whether China’s Zero-Covid policy or the rise of EV cars will also cause the global oil demand to decrease. As a result, despite the stability of oil supply in 2030. The decrease in demand will likely dent the future oil price. The current high price level is just the result of temporary stimulation.