Global oil demand may have passed peak, says BP energy report
BP has called time on the world’s rising demand for fossil fuels after finding that demand for oil may have already reached its peak and faces an unprecedented decades-long decline. Demand for oil may never fully recover from the impact of the coronavirus pandemic, according to the oil firm, and may begin falling in absolute terms for the first time in modern history, Bloomberg reports.
BP’s influential annual report on the future of energy, published on Monday, says oil will be replaced by clean electricity from windfarms, solar panels and hydropower plants as renewable energy emerges as the fastest-growing energy source on record.
Spencer Dale, BP’s chief economist, said the company’s vision of the world’s energy future had become greener due to a combination of the Covid-19 pandemic and the quickening pace of climate action, which has hastened “peak oil”.
The report in effect sounds a death-knell for the growth of global oil demand after two of the report’s three energy scenarios for the next 30 years found that demand reached a peak in 2019. In BP’s third scenario, showing a world in which climate action does not accelerate, oil demand plateaus at similar levels seen in 2019 through the 2020s before declining from 2035. The report has confirmed a chorus of warnings from independent energy economists that the impact of coronavirus will bring forward the start of the oil industry’s terminal decline from the end of the decade.
BP’s chief executive, Bernard Looney, said the findings would help the company to “better understand the changing energy landscape” and would be instrumental in helping it develop its plans to become a net zero energy company by 2050. He admitted earlier this year that he would “not write off” the possibility that coronavirus had brought forward the global peak in oil demand, and was “more convinced than ever” BP must embrace a low-carbon future.
The report’s central scenario, which aligns with the goals of the Paris climate agreement to keep global temperatures well below 2C above pre-industrialised levels, shows demand for oil tumbling by 55% over the next 30 years. Meanwhile, the report’s greenest scenario, in which the world aims to limit global heating to an increase of 1.5C, oil demand falls 80% by 2050.
The energy transition could be even quicker if global governments choose to spur a green economic recovery from the coronavirus crisis. A boom in economic stimulus packages for low-carbon industries, which is expected by many energy experts, was not taken into account in the report because this outcome is “not inevitable”, according to Dale.