BP report suggests that global oil demand may have already peaked

The BP annual Energy Outlook report, published on September 14th, posits the idea that global demand for oil has already peaked and there will be a steady decrease in consumption. They are the first of the traditional oil giants to suggest this. In doing so, BP move closer to projections from energy analysts that the Covid-19 pandemic could be a catalyst for a speedier decline of fossil fuel industry.

Labelling BP as a traditional oil giant is no longer entirely true after their recent re-branding as an integrated energy company. Ever since Bernard Looney took over as Chief Executive in February, BP has taken measures to distance themselves from fossil fuels. They have sold their petrochemicals business, pledged to exponentially grow their low-carbon investments and reduce fossil fuel output by 40% over the next 10 years, aimed to becoming net-zero by 2050 and entered the US offshore wind industry last week.

In the report, three scenarios are presented which cover a range of possible outcomes over the next 30 years.:

• Rapid scenario sees government policy measures, led by carbon price increases and targeted sector measures, result in a reduction in carbon emissions of 70% by 2050.

• Net Zero scenario assumes that the Rapid scenario is augmented by societal behaviour changes leading to a 95% fall in emissions by 2050.

• Business As Usual (BAU) scenario assumes a continuation of current policies, behaviour and technology leading to carbon emissions peaking in the mid-2020s and reducing very slowly leading to a fall of just 10% by 2050.

The first two scenarios both imply that the slump in oil consumption during the lockdown phase of the Covid-19 pandemic never fully recovers. If that is the case, oil consumption will be seen to have peaked in 2019 - a theory also raised in a Carbon Tracker report published a week earlier - and the world’s energy future takes on an even greener tint.. The transition of BP to an integrated energy company has been accelerated by the likelihood that either one or a hybrid of these two scenarios will be actualised.

Amid the scenarios presented – with the caveat that they are nor predictions per se – the report does anticipate renewable sources of energy accounting for 60% of primary energy in Net Zero or 40% in Rapid. Even within the highly unlikely BAU scenario, renewables will still increase to 20% of primary energy.

The BP Energy Outlook report carries heft in the industry and may well influence the thinking of other companies especially since Royal Shell earlier this year also announced plans to become net zero by 2050.