BP has trimmed its outlook for oil and gas demand in its latest annual forecast, arguing that the upheaval unleashed by Russia’s invasion of Ukraine will push countries to pursue greater energy security over the next decade by investing in renewables.
As a result, global carbon emissions could peak earlier in the 2020s than it had previously suggested, BP said in its annual energy outlook on Monday.
But even with increased political support for the shift away from fossil fuel, governments and industry are still far behind in the race to achieve net zero emissions by 2050, the analysis showed.
One of the sector’s most closely read studies, the outlook describes three scenarios for the evolution of the energy sector through to 2050. Under its “New Momentum” scenario, which is designed to “reflect the current broad trajectory” of the world’s energy system, oil demand would be about 93mn barrels a day in 2035, 5 per cent lower than it forecast last year, and natural gas demand would be 6 per cent weaker.
The lower forecasts reflect an increased role for domestic renewable energy as countries reduce dependence on imported hydrocarbons, but also expectations of weaker economic growth in the next decade because of the lasting impact of the energy crisis.
“The experience from the major energy supply shocks of the 1970s suggests that events that heightened energy security concerns can have significant and persistent impacts on energy markets,” Spencer Dale, BP’s chief economist, said in the report.
As a consequence, global carbon emissions under the New Momentum scenario would peak in the 2020s and reach 37.8 gigatonnes in 2030. That is about 4 per cent lower than it outlined last year when it said emissions would peak in the “late 2020s”. The International Energy Agency has forecast that greenhouse house gas emissions will peak in 2025.
US president Joe Biden’s multibillion-dollar support package for clean energy projects, the Inflation Reduction Act, had also helped to improve the outlook for carbon emissions. But “the scale of the decarbonisation” means greater support is required, including policies to facilitate quicker permitting and approval of low-carbon energy and infrastructure, the report said.
Despite the declines, in the New Momentum scenario global emissions would only fall 30 per cent from 2019 levels by 2050, according to the report, which added that a 95 per cent drop from 2019 levels was required for the world to achieve net zero emissions.
In that scenario, oil demand would remain around current levels, close to 100mn b/d, through “much of this decade” before declining gradually to about 75mn b/d by 2050. Under the “Net Zero” scenario, the study’s most ambitious outlook for a reduction in emissions, demand would drop to 70mn b/d in 2035, falling to 20mn b/d by 2050.
However, BP argues that natural declines in existing oilfields mean investment in oil and gas production will still be required for the next 30 years, even under the “Net Zero” outlook.
“The events [of the past year] also show how relatively small disruptions to energy supplies can lead to severe economic and social costs, highlighting the importance that the transition away from hydrocarbons is orderly,” Dale said. Demand for hydrocarbons must therefore fall “in line with available supplies”, he added.
