BP: ‘Energy Transition Underway’

Global energy demand to increase by around 30% to 2035, driven by increasing prosperity in developing countries, partially offset by rapid gains in energy efficiency.

BP released its energy outlook, including on electric cars, which are expected to grow from 1.2 million (2015) to around 100 million in 2035, which is only around 5% of the global car fleet.

“The global energy landscape is changing. Traditional centres of demand are being overtaken by fast-growing emerging markets. The energy mix is shifting, driven by technological improvements and environmental concerns. More than ever, our industry needs to adapt to meet those changing energy needs,” said Bob Dudley, BP group chief executive.

According to the 2017 edition of the BP Energy Outlook, published on Jan. 25, global demand for energy is expected to increase by around 30% between 2015 and 2035, an average growth of 1.3% per year. However, this growth in energy demand is significantly lower than the 3.4% per year rise expected in global GDP, reflecting improved energy efficiency driven by technology improvements and environmental concerns.

The Outlook looks at long-term energy trends and develops projections for world energy markets over the next two decades. The 2017 edition was launched in London by Spencer Dale, BP’s group chief economist, and Bob Dudley, group chief executive.

Main energy sources
While non-fossil fuels are expected to account for half of the growth in energy supplies over the next 20 years, the Outlook projects that oil and gas, together with coal, will remain the main source of energy powering the world economy, accounting for more than 75% of total energy supply in 2035, compared with 86% in 2015.

Oil
Oil demand grows at an average rate of 0.7% a year, although this is expected to slow gradually over the period. The transport sector continues to consume most of the world’s oil with its share of global demand remaining close to 60% in 2035. However, non-combusted use of oil, particularly in petrochemicals, takes over as the main source of growth for oil demand by the early 2030s.

“The possibility that the most important source of growth in oil demand in the 2030s won’t be to power cars or trucks or planes, but rather used as an input into other products, such as plastics and fabrics, is quite a change from the past,” said Spencer Dale.

Gas
Gas grows more quickly than either oil or coal over the Outlook, with demand growing an average 1.6% a year. Its share of primary energy overtakes coal to be the second-largest fuel source by 2035. Shale gas production accounts for two-thirds of the increase in gas supplies, led by growth in the US. LNG growth, driven by increasing supplies in Australia and the US, is expected to lead to a globally integrated gas market anchored by US gas prices.

Coal
Coal consumption is projected to peak in the mid-2020s, largely driven by China’s move towards cleaner, lower carbon fuels. India is the largest growth market for coal, with its share of world coal demand doubling from around 10% in 2015 to 20% in 2035.

Renewables
Renewables are projected to be the fastest-growing fuel source, growing at an average rate of 7.6% per year, quadrupling over the Outlook, driven by increasing competitiveness of both solar and wind. China is the largest source of growth for renewables over the next 20 years, adding more renewable power than the EU and U.S. combined.

Emerging themes
The Outlook highlights a number of questions and uncertainties raised by the energy transition that is underway.

Oil: changing dynamics of demand and supply

All of the demand growth for oil in the period to 2035 comes from emerging markets, with China accounting for half.

The transport sector accounts for around two-thirds of the growth in oil demand. Within that, oil demand for cars increases by around 4 million barrels per day underpinned by a doubling in the global car fleet. The number of electric cars is assumed to increase from 1.2 million in 2015 to around 100 million in 2035 (around 5% of the global car fleet). The Energy Outlook constructs two illustrative scenarios to consider the impact of the broader mobility revolution affecting the car market, including autonomous cars, car sharing and ride-pooling.

“The impact of electric cars, together with other aspects of the mobility revolution, such as self-driving cars, car sharing and ride pooling, is one of the key uncertainties surrounding the long-term outlook for oil” said Spencer Dale.

 

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