BP Analysis: Peak Oil Demand May be Here

September 15, 2020

Bill McKibben launched the fossil fuel divestment campaign in July, 2012 with his Do the Math article in Rolling Stone. Above graph is the performance of Big Oil stocks versus the S&P 500 since then.

Axios:

Global oil consumption is slated to plateau early this decade even without vastly stronger measures to combat climate change, BP said in a new analysis.

Why it matters: BP now sees this moment arriving a decade sooner than last year’s version of their long-term outlook for oil-and-gas, coal, renewables, cars and more.

  • The new projection signals how the COVID-19 pandemic is reshaping analysts’ views of the energy future.
  • The timing of peak oil demand, and the slope of its decline, will affect carbon emissions, corporate strategies and the finances of oil-producing nations. 

Driving the news: BP projects demand for liquid fuels (a rough oil proxy) entering a long plateau in the early 2020s in their “business as usual” (BAU) scenario.

  • It assumes “government policies, technologies and social preferences continue to evolve in a manner and speed seen over the recent past.”
  • Oil demand plateaus at roughly 100 million barrels per day — where it was before the pandemic drove it downward — for almost 20 years, and then declines slightly through 2050.

The intrigue: In other BP scenarios, oil demand never reaches pre-pandemic levels again and declines steeply by 2050, the end of its outlook period.

  • BP’s “rapid transition” case assumes policies strong enough to slash energy-related CO2 emissions by 70% by 2050. It shows oil demand falling to roughly half of pre-COVID levels by 2050.
  • Under its “net zero” scenario — which explores policies and behaviors aligned with holding temperature rise to 1.5°C above pre-industrial levels — demand falls to about one-third of pre-pandemic levels.
  • When it comes to transportation, the largest source of oil demand, all three scenarios see increasing efficiency, while the “rapid transition” and “net zero” cases both see much greater increases in electric cars and hydrogen fuels than BAU.

Where it stands: The report comes as BP is planning to diversify away from its dominant fossil fuel business in coming decades, including plans to cut aggregate oil-and-gas production by 40% by 2030.

The big picture: Oil demand across the models is “significantly affected” by the pandemic, due in part to its economic effect in emerging economies that are centers of demand growth.

  • “The experience of coronavirus also triggers some lasting changes in behavior, especially increased working from home,” the report finds.

Yes, but: “We can’t predict the future; all the scenarios discussed in this year’s Outlook will be wrong,” said BP chief economist Spencer Dale. Instead, BP uses these scenarios to “better understand the range of uncertainty we face as the energy system transitions to a lower-carbon world.”

3 Responses to “BP Analysis: Peak Oil Demand May be Here”


  1. The headline, and the first few sentences of the Axios piece, might be taken as a reason to celebrate, that we’ve turned the corner and can sit back and watch as emissions will now decline.

    This is misleading. Of the three scenarios, the only remotely safe ones are predicated on strong policies to achieve the needed reductions of emissions. The business-as-usual scenario (see plot in link below) is basically level through about 2035, then shows a minor decrease, by 2050! It is only a projection and the authors emphasize the uncertainty.

    https://www.bp.com/en/global/corporate/energy-economics/energy-outlook/introduction/overview.html

    For the intermediate ‘rapid’ scenario: ‘The Rapid Transition Scenario (Rapid) posits a series of policy measures, led by a significant ‎increase in carbon prices and supported by more-targeted sector specific measures, which cause ‎carbon emissions from energy use to fall by around 70% by 2050.’

    • rhymeswithgoalie Says:

      Even without a major dip in ICE vehicles and fossil fuel power plants, we’re looking at a lot of forest carbon going up into the atmosphere, with the plant mass never returning to its 2010 level.

      Sorry, but seeing the US slide into fascism, and knowing how many Americans are going along with it, has really cranked up my cynicism.


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