BP reckons growth in energy demand is over and from now on fossil fuel consumption is set to shrink for the first time in modern history thanks to a combination of the rapid uptake of renewables such as solar and the lasting scars of the COVID-19 pandemic on economic activity around the world.
BP expects global economic activity to only partially recover from the impact of the epidemic over the next few years as travel restrictions ease.
But some “scarring effects” such as work from home and social distancing will lead to lower growth in energy consumption and in turn cut the consumption and production of those sources (oil, natural gas – LNG- and coal).
BP said in a forecast released on Monday that it sees the growth in global economic activity slowing “considerably” over the next 30 years from its past 20-year average, particularly in Africa and Latin America.
In the longer term, BP says demand for coal, oil, and natural gas is set to slow dramatically.
BP’s forecast contains three scenarios – a very slow recovery in activity and demand, a rapid bounce back and the central outlook which
forecasts COVID-19 will knock around 3 million barrels per day (bpd) off by 2025 and 2 million bpd by 2050.
Demand this year will be down by around 8 million barrels a day from 2019’s 101 million barrels a day of oil demand, therefore BP’s central forecast is in fact suggesting that oil demand will not return to last year’s level by 2025.
In its two other scenarios, COVID-19 accelerates the slow down in oil consumption, leading to it peaking last year. In the third scenario, oil demand peaks at around 2030.
While the share of fuels (coal, oil, and natural gas) has shrunk in the past as a percentage of the total energy pie, their consumption has never contracted in absolute terms, BP chief economist Spencer Dale said on Monday.
“(The energy transition) would be an unprecedented event,” Dale said. “Never in modern history has the demand for any traded fuel declined in absolute terms.”
At the same time, “the share of renewable energy grows more quickly than any fuel ever seen in history.
The share of fossil fuels is set to decline from 85% of total primary energy demand in 2018 to between 20% and 65% by 2050 in BP’s three scenarios.
At the same time, the share of renewables is set to grow from 5% in 2018 to up to 60% by 2050.
Last year BP’s outlook had a scenario titled ‘more energy’ which had oil demand growing to about 130 million barrels a day by 2040 – no such scenario is featured this year.