Oil giant cautions that delays in transitioning could be ‘costly’ in its yearly outlook.
California Oil Fields: A Symbol of Continued Demand
The report indicates oil demand will reach approximately 97.8 million barrels per day in 2035 under BP’s scenario reflecting the current trajectory of the global energy system.
BP has adjusted its forecasts for oil and gas demand upwards, signaling a slowdown in the shift towards clean energy sources.
The oil major attributes these projections to the insufficient growth rate of renewable power sources like wind and solar, which are unable to match the increasing global energy demand.
Delay in Transition Poses Potential Economic Risks
BP cautioned that postponing the transition to clean power could have significant economic consequences. The company emphasized that oil will continue to play a substantial role in the global energy system for the next 10-15 years.
According to BP’s report, oil demand is expected to reach around 97.8 million barrels per day (b/d) in 2035 under their scenario mirroring the current global energy system trajectory.
This revised forecast represents a notable increase of over 5% compared to last year’s projection, when BP had reduced its growth forecasts for both oil and gas.
Net Zero Targets and Oil Demand
When factoring in net-zero targets, which involve reducing CO2 emissions by roughly 95% from current levels, the oil demand projection for 2035 is 80.2 million b/d, a 10% increase from the previous year’s forecast.
The outlook suggests that oil demand is projected to be 76.8 million b/d by 2050 in the current trajectory, compared to 73 million b/d predicted last year.
Increase in Natural Gas Demand Forecast
BP’s forecast for natural gas demand in 2035, under the current trajectory, is 3% higher than last year’s estimate.
The last time the oil demand projection for 2030 was revised upward was in 2022, while the gas demand forecast was adjusted in 2018.
The group’s CO2 emissions forecasts are also higher than last year’s projections. However, despite the increased demand for fossil fuels, emission levels are anticipated to be lower by 2050 under both the current trajectory and net-zero scenarios.
Exploring Possible Implications, Not Predictions
The company emphasized that these predictions are not definitive outcomes but rather explorations of “the possible implications of different judgments and assumptions concerning the nature of the energy transition.”
While the report doesn’t explicitly state the reasons for the upward revision in oil and gas demand forecasts, it notes that the decline in oil use for road transport is offset by its increased use in the petrochemicals industry.
Additionally, rising prosperity and living standards in emerging economies are contributing to a more resilient demand for oil.
“Energy Addition Phase” and the Transition Challenge
Spencer Dale, BP’s chief economist, described the current global situation as an “energy addition phase,” where the consumption of both low-carbon energy (renewables) and fossil fuels is on the rise.
The key challenge lies in transitioning to a phase where low-carbon energy increases rapidly enough to surpass the growth in global energy demand, enabling a decline in fossil fuel consumption and carbon emissions.