BP energy outlook suggests global oil demand may have peaked

This year’s influential annual energy outlook from BP, published at the start of BP Energy Week, suggests peak oil demand may have already been reached last year. This marks a dramatic shift from last year when the base case expected consumption to grow over the next decade reaching a peak in the 2030s.

The new report sees oil being replaced by clean electricity from windfarms, solar panels and hydropower plants as renewable energy emerges as the fastest-growing energy source on record.

Bernard Looney, who became chief executive in February, said the report was “instrumental” in developing BP’s strategy for the energy transition, although the company stressed that the scenarios are not predictions.

He commented that ‘it was very difficult to know’ how the oil market trajectory will bear out, but it was possible that demand had hit its maximum level. “Could it have happened? It could have,” he said.

The central theme of this influential report is that the combination of the pandemic and increasing climate action may have hastened ‘peak oil’ which could, potentially, see absolute demand falling for the first time in an industry that has enjoyed sustained growth for more than 100 years.

Looking at likely energy demand over the next 30 years, two of the three scenarios considered by BP suggest that demand reached a peak in 2019 and is already into the start of a decades-long decline. The third scenario, based on no acceleration in climate action, suggests that demand will plateau at the 2019 level for several years before declining from around 2035.

While oil demand is not expected to collapse, a plateau or decline in consumption would fundamentally alter the outlook for investment in the industry and the willingness of shareholders to keep funding new projects.

Looney, said he was “more convinced than ever” that BP must embrace a low-carbon future and that the findings would help the company to “better understand the changing energy landscape” and be instrumental in helping it develop its plans to become a net zero energy company by 2050.

Whilst this appears to offer a gloomy outlook for the fossil fuel industry, it can also be viewed as a further opportunity for those involved to embrace transformation.  Following the publication of the outlook, Looney has shared a blog, ‘10 reasons to be positive about the energy transition’, and commented;
“Anyone who knows me will probably accept I am not one for outrage. I’d rather find solutions than take positions. But I certainly find hope in optimism. And the belief that we can do good in this world.”

 

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