BP’s Energy Outlook Foresees Big Shift for Oil Demand

Abstract

Last year, BP theorized that peak oil demand could occur by 2030. In a major shift, the international major says that peak demand may have already happened. This is according to BP’s newly published Energy Outlook 2020 which outlines different scenarios that the company has developed to imagine how the global energy transition will unfold. In two of these scenarios, a “rapid” transition case and a more aggressive “net-zero” case, the changing winds of the energy landscape coupled with the economic toll of the COVID-19 pandemic will mean that global crude demand never again surpasses 2019’s average of around 100 million B/D. Along these lines, the models suggest that 2019 could also mark the peak of carbon emissions from energy use. To varying degrees both the rapid and net-zero scenarios assume that tighter government policies around emissions and increases in carbon pricing will accelerate the current growth trajectory of renewable installations. The biggest difference between the two is that the net-zero scenario expects energy consumers themselves will move the needle even more by changing their behaviors and energy-consumption preferences. By 2050, these factors could lead global demand to be as low as 55 million B/D to 30 million B/D. BP’s “business-as-usual” case holds as its underlying assumption that government policy, technology uptake/development, and consumer preferences will continue to evolve toward renewables at generally the same pace as we have seen in recent years. Regardless, all three scenarios see the consumption of coal, oil, and natural gas dropping while the role of renewable energy is set to soar. The outlook highlights that fossil fuels accounted for 85% of primary energy demand in 2018 but that by 2050 they may represent only 65 to 20% of the share. “This would be entirely unprecedented. In the modern history of energy, there has never been a sustained decline in the consumption of any traded fuel,” said Spencer Dale, the chief economist at BP. As fossil fuels face diminishing demand, renewable sources of energy could all increase their share of the energy mix from 2018’s figure of 5% to between 20 and 60% by the end of the outlook’s 30-year time frame. Wind and solar are expected to represent the lion’s share of this growth. If that happens, Dale added that renewables would “penetrate the energy system more quickly than any fuel in modern history.” BP’s outlook comes a month after the company announced during an earnings call with investors that it was attempting to shed its reputation as an international oil company and construct a new one as an integrated energy company that will spend $5 billion annually on low-carbon technologies while also setting a target to reduce its overall oil and gas production by 40% by 2030.