BP forecasts oil demand peak in late 2030s

BP has forecast a peak in oil consumption for the first time in its annual long-term forecast, which this year goes out to 2040 and predicts that global oil demand will have flattened by the end of the 2030s.

This is one of the main highlights from the 2018 edition of the BP Energy Outlook, with a core theme of this year’s study being the speed of the energy transition underway and the intensifying competitive pressures within global energy markets. Presenting the study’s findings during IP Week 2018, Spencer Dale, BP Group Chief Economist, focused primarily on the Outlook’s ‘Evolving Transition’ (ET) scenario, which assumes that government policies, technologies and societal preferences evolve in a manner and speed similar to the recent past.

Under the ET scenario, fast growth in developing economies drives up global energy demand to a third higher by 2040. The global energy mix is the most diverse the world has ever seen at this point, with oil, gas, coal and non-fossil fuels each contributing around a quarter of the world’s energy use.

Renewables are by far the fastest-growing fuel source, increasing five-fold and providing around 14% of primary energy by 2040. BP has forecast a peak in oil consumption for the first time in its annual long-term forecast, which this year goes out to 2040 and predicts that global oil demand will have flattened by the end of the 2030s.

This is one of the main highlights from the 2018 edition of the BP Energy Outlook, with a core theme of this year’s study being the speed of the energy transition underway and the intensifying competitive pressures within global energy markets.

Presenting the study’s findings during IP Week 2018, Spencer Dale, BP Group Chief Economist, focused primarily on the Outlook’s ‘Evolving Transition’ (ET) scenario, which assumes that government policies, technologies and societal preferences evolve in a manner and speed similar to the recent past.

Under the ET scenario, fast growth in developing economies drives up global energy demand to a third higher by 2040. The global energy mix is the most diverse the world has ever seen at this point, with oil, gas, coal and non-fossil fuels each contributing around a quarter of the world’s energy use. Renewables are by far the fastest-growing fuel source, increasing five-fold and providing around 14% of primary energy by 2040.

The transport sector continues to dominate global oil demand, accounting for more than half of the overall growth. Most of the growth in energy demand from transport, which flattens off towards the end of the Outlook, comes from non-road (largely air, marine, and rail) and trucks. After 2030, the main source of growth in the demand for oil is from non-combusted uses, particularly as a feedstock for petrochemicals.

Natural gas demand grows strongly over the period, supported by increasing levels of industrialisation and power demand in fast-growing emerging economies, continued coal-to-gas switching, and the increasing availability of low-cost supplies in North America and the Middle East. It overtakes coal as the second largest source of energy. 

Oil and gas together still account for over half of the world’s energy by 2040 in the ET scenario. Global coal consumption flatlines over the study period, with falls in China and the OECD offset by increasing demand in India and other emerging Asian economies. China remains the largest market for coal, accounting for 40% of global coal demand to 2040.

Power accounts for nearly 70% of the increase in primary energy demand. The mix of fuels used in power generation is set to shift materially, with renewable energy gaining share more quickly than any energy source in history, increasing from 7% today to around a quarter by 2040. 

The transport sector continues to be dominated by oil (around 85% in 2040), despite increasing penetration of alternative fuels – particularly natural gas and electricity. BP sees the share of electric vehicles reaching around 15% by 2040 – more than 300mn cars in a global car parc of almost 2bn. However, the share of passenger car kilometres powered by electricity, a metric that also takes account of the intensity with which electric cars are used, is  over 30%. 

The Outlook also considers a scenario in which there is a worldwide ban on the sales of cars with internal combustion engines from 2040. This scenario reduces liquid fuel demand by around 10mn barrels per day relative to the ET scenario but, even so, the level of oil demand in 2040 is higher than in 2016.

‘The suggestion that rapid growth in electric cars will cause oil demand to collapse just isn’t supported by the basic numbers – even with really rapid growth,’ said Dale.

Under the ET scenario, carbon emissions rise by 10% by 2040. While this is far slower than the rates seen in the past 25 years, it remains higher than the sharp decline necessary to achieve commitments under the Paris Agreement. An ‘Even Faster Transition’ scenario in the Outlook sees carbon emissions fall by almost 50% by 2040, due to rapid decarbonisation of the power sector.