Global oil demand will continue to grow into the 2040s even as electrical vehicle fleets expand and the low-carbon energy transition gains traction around the world, BP revealed in its annual Energy Outlook, an industry benchmark report forecasting long-term trends and informs the company’s internal strategy.
The predictions come as other oil companies such as Royal Dutch Shell prepare for demand to peak by the early 2030s and countries make the shift to cleaner forms of energy.
In its latest Energy Outlook, BP forecasts a slowing of greenhouse gas emissions from global energy use, with growth predicted at less than a third of the rate seen over the last two decades (an average of 2.1 percent per annum), rising 0.6 percent a year through 2035 compared to last year’s prediction of 0.9 percent.
BP’s has been steadily decreasing its forecasts for emissions every year since 2011, and if it’s projections prove correct, the global economy will deliver the slowest sustained rate of emissions growth from energy over the next two decades since the company’s records began in 1965.
While on the surface BP’s predictions read as positive, the energy giant noted that emissions are still set to grow by 13 percent through to 2035, a number that is well in excess of the climate goals set under the Paris Agreement. To meet the Paris obligations, emissions need to fall by 30 percent by 2035, BP suggests. “This indicates the need for further policy action,” it notes.
Meanwhile, the report foresees electric vehicles to increase 100-fold by 2035, from one million on the roads today up to 100 million over the next 20 years. This is an increase over its 2016 projections of 70 million cars.
The expanded electric vehicles market in addition to the growing prominence of car sharing and technological advances such as self-driving cars — which increase car usage but reduce the number of cars needed — are expected to curb global oil demand to one million barrels per day (bpd), according to Spencer Dale, chief economist for BP. “We do expect electric vehicles to keep growing rapidly, but in our base case at least the implications of that for oil demand are not a game-changer,” he said during a presentation of the report.
James Leaton, head of research at the Carbon Tracker Initiative, a London-based thinktank, has called these predictions modest. “BP’s 2017 outlook has increased its electric vehicle projections on last year, but this still lags far behind the potential penetration if the technology were to take off, meaning there is still a risk of the company misreading oil demand.”
While oil demand growth is expected to slow from 1 million barrels a day to 400,000 bpd by 2035, it is not likely to peak before the 204s, when consumption will reach around 110 million bpd, according to Dale.
Continued growth is attributed to the rapid expansion of the middle class in emerging economies, where consumers will be buying their first cards. This falls in line with predictions made by the International Energy Agency, but differs from others in the industry who believe peak oil demand could come much sooner.
As oil demand for transportation slows, the consumption of plastics and fabrics manufactured using oil-based feedstock are expected to sustain demand growth as developing economies in Asia, Africa and the Middle East experience rapid growth.
“Key growth isn’t to power transportation … rather oil as an input into other products, particularly into petrochemicals and fabrics,” Dale said.
However, the energy giant also acknowledged the role clean energy transition plays in reshaping global energy demand. Renewables are set to quadruple by 2035 at a rate of 7.6 percent a year, driven by the continued clean energy expansion in China and falling costs in solar and wind. Non-fossil fuels are slated to provide half of the increase in energy consumption. Gas, which is viewed as a less-polluting fossil fuel, will grow faster than coal or oil over the next 20 years at an annual rate of 1.6 percent.
But not everyone is buying into what BP is dishing out. Greenpeace has accused the company of forecasting “a fantasy future where the world fails to act on climate change. “Their desire to make money from accelerating history’s greatest disaster remains sacrosanct and growing supplies of low-cost oil guarantee their blue chip status, forever,” said Charlie Kronick, senior climate advisor for Greenpeace UK.
“Nobody should be fooled. At the same time, BP is finalizing plans to drill for high-risk, high-cost oil we can’t afford and don’t need in the mouth of the Amazon, just down the coast from the world’s largest mangrove forest and next to a newly discovered coral reef. All those determined to tackle climate change — BP shareholders included — should shot stop.”
Greg Muttitt, a senior advisor at campaign group Oil Change International also weighed in on the report: “Every year BP has predicted a slowdown in renewable energy growth, and every year it has been wrong — but it’s done so again today. And BP says electric cars are going nowhere in the next 20 years, a view not shared by the car industry.”