BP projects peak oil is close or already happened

14 September 2020

BP released the 2020 edition of its Energy Outlook, which projects that peak oil may be very close, or already happened in 2019.

The Energy Outlook 2020 considers three main scenarios which explore different pathways for the global energy system to 2050:

• The Rapid Transition Scenario posts a series of policy measures, led by a significant increase in carbon prices, which cause carbon emissions from energy use to fall by around 70% by 2050. This fall in emissions is in line with scenarios which are consistent with limiting the rise in global temperatures by 2100 to well below 2°C above preindustrial levels.
• The Net Zero Scenario assumes that the policy measures embodied in Rapid are both added to and reinforced by significant shifts in societal behaviour and preferences, which further accelerate the reduction in carbon emissions. Global carbon emissions from energy use fall by over 95% by 2050, in line with a range of scenarios which are consistent with limiting temperature rises to 1.5°C.
• The Business-as-usual Scenario (BAU) assumes that government policies, technologies and social preferences continue to evolve in a manner and speed seen over the recent past. A continuation of that progress, albeit relatively slow, means carbon emissions peak in the mid-2020s. Despite this peaking, little headway is made in terms of reducing carbon emissions from energy use, with emissions in 2050 less than 10% below 2018 levels.

The global demand for liquid fuels, Figure 1, in Rapid and Net Zero never fully recovers from the fall caused by ‎Covid-19, implying that oil demand peaked in 2019 in both scenarios. ‎The consumption of liquid fuels falls significantly in both scenarios, declining to ‎less than 55 Mb/d and around 30 Mb/d in Rapid and Net Zero respectively by 2050. The falling ‎demand is concentrated in the developed world and China, with consumption in India, other ‎Asia and Africa broadly flat as a whole in Rapid, but falling below 2018 levels ‎from the mid-2030s onwards in Net Zero.

In contrast, after recovering from the impact of Covid-19, the consumption of liquid fuels in BAU ‎is broadly flat at around 100 Mb/d for the next 20 years, before edging lower to around 95 Mb/d ‎by 2050. Demand for liquid fuels continues to grow in India, other Asia and Africa, offset by the ‎trend decline in consumption in developed economies.‎

The decline in oil consumption is driven by a combination of factors, including increasing efficiency and electrification of road transportation, and slowing global economic growth.

Some of the other key projections of the Outlook are:

• Energy demand grows by 0.3% per annum in Rapid and Net Zero and 0.7% p.a. in Business-as-usual (BAU). This is significantly slower than the past 20 years, reflecting weaker economic growth and faster declines in energy intensity.
• Between 2018 and 2050 net carbon emissions from energy use decline by 10% in BAU, 72% in Rapid and 96% in Net Zero.
• Energy demand from the transport sector grows by 0.7% p.a. in both Rapid and Net Zero and by 0.9% p.a. in BAU. However, growth is significantly slower than the past 20 years (2.2% p.a.).
• Oil and coal consumption decline in all three scenarios. For oil, the decline ranges from 10% to 78%. For coal the decline is more marked, ranging from 22% to 92%.
• The outlook for gas is more durable than either coal or oil. Consumption in 2050 increases by 35% in BAU and drops by 4% in Rapid and 41% in Net Zero.
• Nuclear gains share in the energy mix in all scenarios, reaching 7% BAU, 9% in Rapid and 10% in Net Zero.
• On average, renewable energy consumption grows every year by 5.7% in BAU, 7.5% in Rapid and 8.5% in Net Zero, aided by falling costs of production and policies encouraging a shift to lower carbon energy sources.

The projected oil demand and energy consumption figures are significantly smaller compared to the predictions in the 2019 edition of the Outlook. These reduced projections suggest that analysts believe the Covid-19 pandemic will have a long-lasting, if not permanent, impact on the world economy and energy markets.

According to the Outlook, the disruptions associated with Covid-19, together with the increase in trade disputes and sanctions in recent years, may also lead to a process of deglobalization, as countries seek to increase their resilience by becoming less dependent on imported goods and services, and companies reshore certain activities and move supply chains closer to home. One manifestation of these trends is that concerns about energy security will likely increase, particularly in countries which are highly dependent on energy imports.

Source: BP Energy Outlook