BP stated in a forecast published today that oil may have reached its peak due to the pandemic and that renewables will take the place of fossil fuels
BP has released its 2020 Energy Outlook, which is remarkably different from its 2019 report, when BP’s base case only expected oil consumption to grow over the next decade, reaching a peak in the 2030s.
The report looks at three scenarios to explore energy transition to 2050. BP writes that “the scenarios help to illustrate the range of outcomes possible over the next 30 years, although the uncertainty is substantial and the scenarios do not provide a comprehensive description of all possible outcomes.”
BP’s three scenarios are Rapid Transition (carbon emissions from energy use to fall by around 70% by 2050), Net Zero (carbon emissions from energy use fall by over 95% by 2050), and Business-as-usual (emissions in 2050 less than 10% below 2018 levels). But what unites all three scenarios is this:
As a result of these policies and shifts in societal preferences, there is a decline in the share of hydrocarbons (coal, oil, and natural gas) in the global energy system in all three scenarios. This is matched by a corresponding increase in the role of renewable energy as the world increasingly electrifies. The scale of this shift varies significantly across the three scenarios, with the share of hydrocarbons in primary energy declining from around 85% in 2018 to between 70-20% by 2050 and the share of renewable energy increasing to between 20-60%.
In BP’s first two scenarios, COVID-19 accelerates the slowdown in oil consumption, leading to it peaking last year. In its Business-as-usual scenario, oil demand peaks by 2030.
BP chief economist Spencer Dale said:
[The energy transition] would be an unprecedented event. Never in modern history has the demand for any traded fuel declined in absolute terms.
[Meanwhile,] the share of renewable energy grows more quickly than any fuel ever seen in history.
Let’s just take a minute to fully absorb the enormity of this report: BP is a global oil giant. And it is stating that fossil fuels will be replaced by green energy such as wind, solar, and hydropower because oil has reached its peak as a result of the pandemic.
So it’s no surprise, as Electrek reported September 11, that BP invested $1.1 billion in offshore wind in the US. It’s good environmental sense. It’s good business sense. BP isn’t being benevolent; it knows that’s where the market is going.
BP also thinks that overall global economic activity will slow in the next 20 years. Why? The impact of climate change on the economy.
We can only hope that the world unites to achieve the Net Zero scenario. If nothing else works, money will always talk.