OPEC to lose its pricing power: Capital Economics
Baku, Azerbaijan, Dec.7
By Leman Zeynalova – Trend:
OPEC is expected to lose its pricing power by 2040, Capital Economics, a UK-based consulting company, said in its long-term outlook.
Once growth in consumption starts to weaken, OPEC is likely to ramp up output to prevent significant amounts of its oil reserves being left underground, Trend reports citing the company.
Capital Economics believes that the continued increases in shale oil production in the US, and the transfer of this technology to other countries, should make oil supply much more responsive to changes in prices.
“Indeed, the marginal cost of production is likely to fall as advances in shale technology force more expensive forms of supply out of the market. In this scenario, we expect OPEC (if it is still in existence) to be losing its pricing power,” said the company.
Stagnating demand, ample output and lower marginal costs should all put downward pressure on oil prices, according to the report.
“We estimate that the real price of Brent will fall to $47 per barrel (in 2018 prices) by 2040, down from around $70 today. In contrast, we think growth in the green economy will support global demand for copper over the forecast period and more than offset the negative impact of slower, and more services-intensive growth, in China (the largest consumer by far),” said the consulting company.
Both renewable energy and electric vehicles are copper intensive, Capital Economics believes.
“At the same time, the current project pipeline for copper mine supply looks thin, pointing to higher prices over the next decade. In the longer term, supply should pick up to meet demand, but we anticipate rising real copper prices in the next decade,” said the company.
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