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Pumpjacks draw oil out of the ground near Olds, Alta., on July 16, 2020.Jeff McIntosh/The Canadian Press
Energy giant BP is predicting fossil fuel consumption will shrink for the first time in modern history, with peak oil demand now likely in the world’s rear-view mirror.
The forecast in the company’s 2020 Energy Outlook, released Monday, says that global economic activity will partly recover from the COVID-19 pandemic over the next few years, but "scarring effects,” including work-from-home edicts, will lead to slower growth in energy consumption.
While the overall demand for energy will grow, the supply will change: The role of fossil fuels will decrease while renewable energy will increase, the report says.
In the case of oil, BP expects global demand to fall over the next 30 years, driven in part by an increase in electric – and more efficient – vehicles.
Canada is the fourth-largest producer and exporter of oil in the world, the vast majority of which comes from Alberta’s oil sands.
The pandemic-caused hit to oil has already decimated Alberta’s coffers, where royalties from fossil fuels are set to drop to their lowest point in more than four decades. The slump plays a huge part in the province’s forecast deficit of $24.2-billion. Canada’s bottom line will also take a hit if BP’s forecast holds steady; the oil and gas sector comprises 5.6 per cent of the country’s GDP, according to federal government figures.
The report includes three scenarios that assume different levels of government policies around the world aimed at meeting the 2015 Paris climate agreement to limit global warming to well below 2 degrees Celsius from preindustrial levels.
WORLD LIQUID FUELS CONSUMPTION
Present vs. three future scenarios,
in millions of barrels per day
Rapid Transition: Assumes policy measures
that cause carbon emissions from energy use
to fall by about 70 per cent by 2050
Net Zero: Assumes the policy measures
embodied in Rapid Transition are augmented
and reinforced by significant shifts in societal
behaviour
Business-as-usual: Assumes government poli-
cies, technologies and social preferences evolve
in a manner and speed similar to recent past
120
Business-
as-usual
100
80
Rapid
Transition
60
40
Net Zero
20
0
2030
2000
2010
2020
2040
2050
JOHN SOPINSKI/THE GLOBE AND MAIL
SOURCE: bp energy outlook 2020
WORLD LIQUID FUELS CONSUMPTION
Present vs. three future scenarios,
in millions of barrels per day
Rapid Transition: Assumes policy measures that cause
carbon emissions from energy use to fall by about 70
per cent by 2050
Net Zero: Assumes the policy measures embodied in
Rapid Transition are augmented and reinforced by
significant shifts in societal behaviour
Business-as-usual: Assumes government policies, tech-
nologies and social preferences evolve in a manner and
speed similar to recent past
120
Business-
as-usual
100
80
Rapid
Transition
60
40
Net Zero
20
0
2030
2045
2000
2005
2010
2015
2020
2025
2035
2040
2050
JOHN SOPINSKI/THE GLOBE AND MAIL
SOURCE: bp energy outlook 2020
WORLD LIQUID FUELS CONSUMPTION
Present vs. three future scenarios, in millions of barrels per day
Rapid Transition: Assumes
policy measures that cause
carbon emissions from
energy use to fall by about
70 per cent by 2050
Net Zero: Assumes the policy
measures embodied in Rapid
Transition are augmented and
reinforced by significant shifts
in societal behaviour
Business-as-usual: Assumes govern-
ment policies, technologies and
social preferences evolve in a
manner and speed similar to recent
past
120
Business-
as-usual
100
80
Rapid
Transition
60
40
Net Zero
20
0
2030
2045
2000
2005
2010
2015
2020
2025
2035
2040
2050
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: bp energy outlook 2020
In BP’s two faster-moving scenarios, COVID-19 accelerates the slowdown in oil consumption, leading to use peaking last year. In the third scenario, oil demand peaks around 2030.
While the share of fuels has shrunk in the past as a percentage of the total energy pie, consumption of them has never contracted in absolute terms, BP chief economist Spencer Dale told reporters.
“[The energy transition] would be an unprecedented event,” Mr. Dale said. “Never in modern history has the demand for any traded fuel declined in absolute terms.”
At the same time, he said, “the share of renewable energy grows more quickly than any fuel ever seen in history.”
That prediction reflects BP’s own move out of fossil fuels.
New chief executive Bernard Looney vowed to reinvent BP by shifting to renewables when he took the helm of the 111-year-old oil and gas company in February. He wants to reduce BP’s oil and gas production by 40 per cent – or at least one million barrels a day – by 2030.
The company sold off its global petrochemicals business for US$5-billion this summer. It’s also preparing to sell a large chunk of its oil and gas assets even if crude prices bounce back from the COVID-19 crash, according to reports from Reuters, because it wants to invest more in renewable energy.
BP’s energy outlook veers from the common narrative that oil demand will grow over the coming decades, fuelled by the rise of the middle class in countries such as India and China and continued economic development in other parts of the world.
The International Energy Agency, for instance, said in its March oil forecast that demand will likely grow by 5.7 million barrels a day by 2025, despite the difficult start in 2020 because of the coronavirus.
Although the pandemic “added a major layer of uncertainty to the oil market outlook,” the IEA said in its August oil market report that global demand would hover around 97 million barrels a day in 2021, up from 92 million in 2020. That’s actually down from the agency’s initial predictions, because of the continued high number of COVID-19 cases and weakness in the aviation sector.
Alberta Premier Jason Kenney has taken a similar position, arguing that oil demand and prices will only grow after the pandemic. On Monday, Alberta Energy Minister Sonya Savage said in an e-mail that energy consumption forecasts show oil and gas “dominating” the mix “for decades to come.”
“That oil will come from somewhere, and if not Alberta, other countries [such as] Russia and Saudi Arabia will increase their market share,” she said.
Despite the bleak outlook for oil, BP puts natural gas in a far better spot, noting it’s likely to be more resilient because of the crucial role it will play in supporting developing economies as they reduce their reliance on coal.
The report notes gas is also a source of near-zero carbon emissions when combined with carbon capture technologies.
With a report from Reuters
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