Global oil demand has already peaked in two of the three scenarios BP has modelled in its 2020 Energy Outlook. And there is a chance that the Covid-19 crisis will lead to acceleration of the energy transition, BP said.
“This year’s Outlook explores three main scenarios — Rapid, Net Zero and Business-as-usual — which span a wide range of possible outcomes,” chief executive Bernard Looney said. “Those three scenarios have helped us to develop a strategy that we think is robust to the uncertainty around the pace and nature of the energy transition.”
BP is presenting on 14-16 September more details on how it plans to deliver on its ambitious new strategy unveiled a month ago, which includes its oil production dropping by 40pc and low-carbon investments jumping tenfold by 2030.
The Energy Outlook‘s Rapid Transition scenario envisages a series of policy measures that result in carbon emissions from energy use falling by about 70pc by 2050. The Net Zero scenario sees the measures of the Rapid scenario “both added to and reinforced by significant shifts in societal behaviour and preferences”, resulting in carbon emissions from energy use falling by over 95pc by 2050. And the Business-as-usual scenario assumes “that government policies, technologies and social preferences continue to evolve in a manner and speed seen over the recent past”.
All three scenarios show that oil and gas “will be increasingly challenged as society shifts away from its reliance on fossil fuels” while “renewable energy, led by wind and solar power, is the fastest growing source of energy over the next 30 years”.
Oil demand has already peaked in the Rapid and Net Zero scenarios, while “after recovering from the impact of Covid-19, the consumption of liquid fuels in Business-as-usual is broadly flat at around 100mn b/d for the next 20 years, before edging lower to around 95mn b/d by 2050,” BP said.
“The level of oil demand in both Rapid and Net Zero does not fully recover from the sharp drop caused by Covid-19, with demand falling by around 50pc by 2050 in Rapid and almost 80pc in Net Zero,” the Outlook said.
But “US tight oil in Rapid recovers from the impact of Covid-19 and expands until the early 2030s, with this increase in output more than offset by falls in Opec,” it said. “Thereafter, Opec production broadly stabilises as declines in global demand are broadly matched by falls in US tight oil and other non-Opec supplies.”
Shell revealed last week that global oil demand peaks before 2030 in two of the three “pathways” the company modelled in the new Covid-19 world.
BP said that Covid-19 is “assumed to have a persistent impact on economic activity and energy demand”. This impact could be as high as a 5mn b/d hit on oil demand by 2025, the Outlook shows.
“There must be a chance that the increasing fragilities associated with the way we are operating on our planet highlighted by Covid-19, combined with the increased momentum in terms of Building Back Better, and together with unprecedented levels of government intervention — there is a chance that Covid-19 leads to acceleration in the energy transition,” BP chief economist Spencer Dale said.