Spencer Dale presented the 2017 BP Energy Outlook last week. The base case, or most likely path, predicts 30% growth in energy consumption by 2035, which will shift away from the US and Europe and towards fast-growing markets in China and India. Energy will be used more efficiently, and the proportion of renewables will increase. While BP expects carbon emissions to continue to grow, this will be more slowly than in the past.
The greatest decline is expected to be in coal demand, with global consumption peaking in the mid-2020s. This is in large part because China’s coal consumption is forecast to decline sharply from 66% of its energy mix today to less than 45% by 2035.
Renewables will be the fastest growing source of global energy as the price of solar and wind generation falls, with China being the largest source of growth. A mix of nuclear, renewables, and hydro will lead to continued decarbonisation, although BP still expects 75% of the energy mix to be from oil and gas in 2035 as India surpasses China in terms of growth. BP does not envisage India following China’s path of a decline in energy intensity because it is already very service-orientated.
The greatest area of uncertainty is the transition to a low-carbon world. BP has updated this year’s report to show a faster transition to a low-carbon economy, with emissions peaking in early 2020 but still falling short of the goals under the Paris Agreement. It sees carbon pricing as the most effective means to incentivise emission reductions, rather than regulation.
Global growth in car ownership will not be accompanied by the same extent of oil demand growth as would have been seen in the past due to a combination of increased fuel efficiency, a digital revolution, and increased ownership of electric cars. BP’s modelling shows an increase from 19 Mb/day in 2015 to 23 Mb/day in 2035. Demand from non-combusted demand is set to take over as the main point of growth by 2030. That is, the use of oil as an input into other products such as plastics.
Critics argue that BP’s view of growth in renewables and the take-up of electric cars is at odds with other higher forecasts, which results in BP’s high predictions for global oil and gas demand. Read the full BP Energy Outlook , or interrogate its energy charting tool.
