The world has already passed “peak oil” demand, according to Carbon Brief analysis of the latest energy outlook from oil major BP.
The 2020 edition of the annual outlook reveals – albeit indirectly – that global oil demand will not regain the levels seen last year. It adds that demand could soon fall rapidly in the face of stronger climate action – by at least 10% this decade and by as much as 50% over the next 20 years.
The latest outlook was delayed by six months so that it could reflect the unprecedented impact of the coronavirus pandemic. The delay also reflects BP’s plans, set out over the course of this year, to reach net-zero emissions by 2050 – as an “integrated energy company”, rather than an oil major.
This means that alongside its conservative “business-as-usual” scenario – in which demand for gas continues to rise indefinitely – BP has also looked at the effect of stronger climate action. In its “rapid” and “net-zero” scenarios, coal and oil see fast declines, while gas peaks by 2025 or 2035.
Although the net-zero focus is new, Carbon Brief analysis shows the outlook continues the trend of previous editions, by cutting the prospects for fossil fuels while raising the bar for renewables.
‘Peak oil’
Global oil demand has doubled over the past 50 years, reaching around 100m barrels per day in 2019, equivalent to an annual energy consumption of 192 exajoules (EJ).
In earlier editions of the BP outlook, global oil demand was expected to continue rising steadily. Indeed, successive editions had raised the outlook for oil, shown in blue lines in the chart below.
By 2018, BP’s outlook started to foresee an end to the upwards march for oil, with demand peaking by the mid-2030s. But the downwards revision in this year’s edition is much more dramatic (red lines), showing demand having already peaked in 2019, with large potential downside risks.
Global oil demand 1965-2050, exajoules. Historical data is shown in black, while previous editions of the BP outlook are shown in shades of blue. The three scenarios from the latest 2020 edition are shown in shades of red. Source: Carbon Brief analysis of BP Energy Outlooks 2011-2020, the BP Statistical Review 2020 and International Energy Agency forecasts for 2020. Chart by Carbon Brief using Highcharts.
In his presentation for the new outlook, BP chief economist Spencer Dale does say that it shows oil demand having peaked in 2019, but only in two of the three scenarios. For the “business-as-usual” scenario, he says demand is “more resilient” and recovers to “around its pre-Covid levels” by 2025.
However, Carbon Brief analysis of the outlook, combined with BP figures released separately in June, shows that oil demand would never surpass levels seen in 2019, when measured in terms of the energy it contains.
[The outlook data puts oil demand in 2018 at 190.4EJ, but does not include a figure for 2019. The BP statistical review reported oil demand growth of 0.8% between 2018 and 2019, which Carbon Brief used to estimate demand in 2019 of 191.9EJ. This is marginally higher than the level of demand in 2025 under the business-as-usual outlook, some 191.3EJ.]
It is interesting to compare the latest outlook to the words co-authored by Dale in a January 2018 commentary with Bassam Fattouh, director of the Oxford Institute of Energy Studies. In that piece, the pair argued that the focus on peak oil “seems misplaced”. They continued:
“More importantly, there is little reason to believe that once it does peak, that oil demand will fall sharply. The world is likely to demand large quantities of oil for many decades to come.”
In contrast, the newly released BP outlook shows that oil demand could indeed “fall significantly”, declining by at least 10% by 2030 and by as much as 50% by 2040.
The largest reduction in oil demand is in BP’s “net-zero” scenario, where global CO2 emissions fall by more than 95% in 2050, compared to their 2018 levels.
This trajectory is, says BP, “slower” than in “below 1.5C” scenarios published by the Intergovernmental Panel on Climate Change, meaning faster declines in fossil fuel use – or reliance on negative emissions – would be needed to stay within this temperature limit.
