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BP forecasts terminal decline in oil demand

The 2020 edition of the BP Energy Outlook – delayed by six months to reflect the impacts of COVID-19 – is focused around three main scenarios: ‘Rapid’, ‘Net Zero’ and ‘Business-as- Usual’ (BAU). In all three scenarios, global energy demand grows, driven by increasing prosperity and living standards in the emerging world. In all three cases, oil demand is predicted to fall over the next 30 years as renewables and electrification both rise.

Primary energy demand plateaus in the second half of the period in Rapid and Net Zero, as improvements in energy efficiency accelerate. In BAU, demand continues to grow throughout, reaching around 25% higher by 2050.

The transition to a lower carbon energy system results in a more diverse energy mix, as all three scenarios see a decline in the share of the global energy system for hydrocarbons and a corresponding increase in renewable energy as the world electrifies. The scale of the shift varies significantly across the scenarios, with the share of hydrocarbons in primary energy declining from around 85% in 2018 to between 65–20% by 2050 and renewable energy rising to 20–60%.

The scenarios all see oil demand fall over the next 30 years – 10% lower by 2050 in BAU, around 55% lower in Rapid and 80% lower in Net Zero. In BAU, demand plateaus in the early 2020s and in both Rapid and Net Zero oil demand never fully recovers from the fall caused by COVID-19.

The decline in oil demand is driven by the increasing efficiency and electrification of road transportation. In all three scenarios the use of oil in transport peaks in the mid-to-late 2020s. The share of oil in meeting transport demand falls from over 90% in 2018 to around 80% by 2050 in BAU, but to 40% in Rapid and to just 20% in Net Zero.

Meanwhile, global demand for gas varies significantly across the scenarios. It peaks in the mid- 2030s in Rapid and in the mid- 2020s in Net Zero, and by 2050 is broadly similar to 2018 and around a third lower, respectively. In BAU, gas demand increases throughout the next 30 years to be around a third higher by 2050.

The company foresees two roles for gas in accelerating the energy transition. In developing economies, it could support a shift away from coal in places where renewables cannot expand sufficiently. It could also be combined with carbon capture, use and storage (CCUS) infrastructure as a source of near-zero carbon power. Gas combined with CCUS accounts for between 8–10% of primary energy by 2050 in Rapid and Net Zero.

Renewables are the fastest growing source of energy over the next 30 years in all the scenarios, growing from around 5% of primary energy in 2018 to 60% by 2050 in Net Zero, 45% in Rapid and 20% in BAU. Wind and solar power dominate this growth, underpinned by continuing falls in development costs.

As the energy system progressively decarbonises, BP foresees increasing roles for both hydrogen and bioenergy. Use of hydrogen increases in the second half of the Outlook in Rapid and Net Zero, particularly in activities which are harder or more costly to electrify. By 2050, hydrogen accounts for around 7% of final energy consumption (excluding non-combusted) in Rapid and 16% in Net Zero.

The scenarios show that achieving a rapid and sustained fall in carbon emissions is likely to require a series of policy measures, led by a significant increase in carbon prices. Delaying these policies measures and societal shifts may significantly increase the scale of the challenge and lead to significant additional economic costs and disruption.

News Item details

Journal title: Energy World

Subjects: Oil and gas - COVID-19 - Coronavirus - Energy consumption - Renewables -

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