A key factor in energy supply and demand outcomes of the EF2020 Scenarios, Reference and Evolving, are our assumptions about the global price for crude oil and natural gas. The Reference and Evolving Scenarios have different premises regarding both Canadian and international climate action.
Our analysis assumes that greater climate action globally translates into lower demand for fossil fuels in the Evolving Scenario relative to the Reference Scenario. This premise results in clear assumptions about crude oil and natural gas prices, which feed directly into our scenario modelling.
Figure 1 illustrates how the international crude oil and natural gas market context relates to the EF2020 scenarios.Footnote1
While our Energy Futures series modelling is limited to Canada, various organizations produce global scenarios of energy supply and demand. Figure 2 below illustrates change in recent and projected global demand from recent publicly available scenarios (BP, EIA, Shell, IEA), indexed to 2010 levels.
Figure 3 compares their conceptual relationship to the Reference and Evolving Scenarios, as well as the analysis in the “Towards Net Zero” section of EF2020.
These global scenarios depict a broad range of future outcomes for international crude oil and natural gas demand. Canada is an important producer of both of these commodities; the ultimate evolution of demand for the commodities will be important drivers of Canada’s energy outlook.
This is particularly true if the world moves closer to trajectories showing greater climate action. For example, relative to current levels, BP’s Net Zero scenario shows 69 per cent and 34 per cent reductions in global crude oil and natural gas demand, respectively.
As mentioned in the EF2020 “Towards Net-Zero” section on future oil sands production, lower demand will likely imply a more competitive environment and lower benchmark prices for crude oil. Additionally, production could become more costly due to use of technologies that reduce upstream emissions, and an increased focus on ESG considerations in order to attract sufficient investment.
Assumptions of Canadian LNG exports, not shown, are guided by similar logic.