Not All Energy Transitions Are Alike: Disentangling the Effects of Demand and Supply-Side Policies on Future Oil Prices
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Summary:
We use structural scenario analysis to show that the climate policy mix—supply-side versus demand-side policies—can lead to different oil price paths with diverging distributional consequences in a netzero emissions scenario. When emission reduction is driven by demand-side policies, prices would decline to around 25 USD per barrel in 2030, benefiting consuming countries. Vice versa, supply-side climate policies aimed at curbing oil production would push up prices to above 130 USD per barrel, benefiting those producing countries that take the political decision to keep on producing. Consequently, it is wrong to assume that oil prices will necessarily decline due to the clean energy transition. As policies are mostly formulated at the country level and hard to predict at the global level, the transition will raise uncertainty about the price outlook.
Series:
Working Paper No. 2023/160
Subject:
Commodities National accounts Oil Oil consumption Oil prices Oil production Prices Production
Frequency:
regular
English
Publication Date:
August 4, 2023
ISBN/ISSN:
9798400249242/1018-5941
Stock No:
WPIEA2023160
Format:
Paper
Pages:
69
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