Why the world will remain thirsty for oil for decades, according to BP




Predicting what will happen during the next 12 months is tricky enough in most cases, let alone looking ahead more than 20 years, yet BP bravely attempts this each year with its annual energy review.

This year’s review, looking ahead to 2040, makes a number of eye-catching predictions.

The first, not terribly good news for a major oil producer you might think, is the extent to which renewable energy will increasingly dominate the mix of supply.

It will, BP predicts, account for more than half of the energy capacity added globally between now and 2040.

By then, the company suggests, renewables will provide a quarter of the world’s energy – with oil, gas and coal each also accounting for a quarter.

This would mean the world’s energy supply is more diverse than at any point in history.

As in the UK, which has more or less weaned itself off the fuel, more countries will become less dependent on coal.

Waves crash onto the beach after a storm surge in Hemsby, eastern England December 6, 2013
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A switch to renewable energy is expected to intensify

Coal consumption is expected to plateau during the next two decades and, as the world approaches the middle of the century, it will be less dependent on coal as a source of energy than at any point since the Industrial Revolution.

This is a huge shift – even as recently as the 1960s, coal accounted for more than half of the world’s energy supplies.

Much of that slowdown will be in China, BP says, although it predicts that, by 2040, the Middle Kingdom will still account for two-fifths of global coal consumption.

Relatively quickly, natural gas will overtake coal to become the second most widely used source of energy globally after oil and, by 2040, it will be coming close to overtaking oil.

More than half of new gas supplies will come from the United States, Qatar and Iran, with the US predicted by 2040 to account for a quarter of global gas production – more than either the Middle East or the former countries of the Soviet Union, the two major suppliers today.

A worker checks the valve on a pipe at the Al-Sheiba oil refinery in the southern Iraqi city of Basra
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Oil demand looks likely to peak by the late 2030s

That’s the supply side of the equation.

As for demand, BP lays out a number of different scenarios, the most striking of which is what it calls the “Evolving Transition” scenario.

Under this scenario, the global economy would double in size by 2040, driven by rising prosperity in emerging markets and lifting 2.5 billion people out of low incomes.

However, due to improvements in energy efficiency, demand for energy is predicted to grow by only a third during the same period.

Most of that increase in demand is expected to come from electrification as more people move to cities.

Because most of this activity will take place in Africa, Asia and the Middle East, the higher electricity demand will come not from heating but from air conditioning systems.

Fuel prices are determined by oil prices and currency movements
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BP expects the combustion engine, rather than electric vehicles, to remain dominant by 2040

Demand will also rise in the transport sector but increased efficiency means the rate of extra demand for energy for use in transportation will be sharply lower than increased demand for transport during the period.

BP predicts that, worldwide, there will be two billion cars by 2040 but expects the internal combustion engine will continue to dominate – with just 15% of all cars being electric-powered by this date.

Electric vehicles will, though, account for 30% of miles driven, since they are expected to be used more intensely than traditional petrol vehicles.

BP admits that the extent to which electric vehicles will take off is one of the harder things it has to forecast during the period.

Oil production
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Demand from extra oil looks set to come from growing economies such as China and India

Possibly its most striking forecast in this regard is the extent to which people will, by 2040, be sharing cars more.

One scenario that the company sketches out is that, by 2040, government steps up efforts to replace use of cars powered by traditional internal combustion engines with electric vehicles.

Yet it argues that, even under this scenario, demand for oil would continue to grow.

Almost all of the demand for extra oil is predicted to come from emerging economies such as China and India.

By the end of the 2030s, however, it is fair to say BP expects oil demand to be peaking as the switch to renewables intensifies.

And one factor is likely to eat into oil demand, albeit more modestly, before then – the growing opposition to single-use plastics and packaging of the kind championed by Sky’s Ocean Rescue campaign.

This could reduce global demand by as much as two million barrels per day by 2040.

That may sound a lot but, set against global demand of 110 million barrels per day by 2040, it must be viewed in context.

Oil producers such as BP do not yet, it seems, need to start a dash into other energy sources just yet.




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