Oil drilling ship Tungsten Explorer off the coast of Lebanon on Feb. 25, 2020. Photo: Joseph Eid/AFP via Getty Images
Global oil consumption is slated to plateau early this decade even without vastly stronger measures to combat climate change, BP said in a new analysis.
Why it matters: BP now sees this moment arriving a decade sooner than last year's version of their long-term outlook for oil-and-gas, coal, renewables, cars and more.
- The new projection signals how the COVID-19 pandemic is reshaping analysts' views of the energy future.
- The timing of peak oil demand, and the slope of its decline, will affect carbon emissions, corporate strategies and the finances of oil-producing nations.
Driving the news: BP projects demand for liquid fuels (a rough oil proxy) entering a long plateau in the early 2020s in their "business as usual" (BAU) scenario.
- It assumes "government policies, technologies and social preferences continue to evolve in a manner and speed seen over the recent past."
- Oil demand plateaus at roughly 100 million barrels per day — where it was before the pandemic drove it downward — for almost 20 years, and then declines slightly through 2050.
The intrigue: In other BP scenarios, oil demand never reaches pre-pandemic levels again and declines steeply by 2050, the end of its outlook period.
- BP's "rapid transition" case assumes policies strong enough to slash energy-related CO2 emissions by 70% by 2050. It shows oil demand falling to roughly half of pre-COVID levels by 2050.
- Under its "net zero" scenario — which explores policies and behaviors aligned with holding temperature rise to 1.5°C above pre-industrial levels — demand falls to about one-third of pre-pandemic levels.
- When it comes to transportation, the largest source of oil demand, all three scenarios see increasing efficiency, while the "rapid transition" and "net zero" cases both see much greater increases in electric cars and hydrogen fuels than BAU.
Where it stands: The report comes as BP is planning to diversify away from its dominant fossil fuel business in coming decades, including plans to cut aggregate oil-and-gas production by 40% by 2030.
The big picture: Oil demand across the models is "significantly affected" by the pandemic, due in part to its economic effect in emerging economies that are centers of demand growth.
- "The experience of coronavirus also triggers some lasting changes in behavior, especially increased working from home," the report finds.
Yes, but: "We can’t predict the future; all the scenarios discussed in this year’s Outlook will be wrong," said BP chief economist Spencer Dale. Instead, BP uses these scenarios to "better understand the range of uncertainty we face as the energy system transitions to a lower-carbon world."