Oil demand may never reach a full recovery, says BPSeptember 16, 2020
The energy giant predicts that the fossil fuel may never return to its pre-pandemic levels.
The global oil demand may never come back to the highs it had reached before the pandemic struck, said BP in a recent forecast. The company expects that renewables will be stepping into the areas that had formerly belonged to petroleum and other fossil fuels.
BP’s 2020 Energy Outlook report looked strikingly different from the forecast published in 2019.
In last year’s report, BP predicted that oil demand would continue its growth over the next decade, peaking at some point in the 2030s. However, this year’s report has taken an entirely different direction. It examined three potential scenarios in which energy will transition through to 2050.
According to the energy giant, “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.” These three scenarios include:
- Rapid Transition (in which there will be a 70 reduction in carbon emissions from energy by 2050)
- Net Zero (in which there will be a 95 reduction in carbon emissions from energy by 2050)
- Business-as-usual (in which there will be a less than 10 reduction in carbon emissions from energy by 2050 when compared to 2018 levels).
Each scenario suggests a different degree of reduction of oil demand, but they are all reductions.
In the first two scenarios BP identified, the pandemic accelerates fossil fuel consumption’s reduction, meaning that it peaked in 2019 as opposed to some time in the 2030s. That said, even the slowest scenario, Business-as-usual, fossil fuel will still have peaked by 2030, a handful of years earlier than had been predicted in 2019. As a growing number of economies base their recovery on the implementation of renewable energy and on power consumption reduction, this is not difficult to believe.
This energy transition and reduction in oil demand “would be an unprecedented event. Never in modern history has the demand for any traded fuel declined in absolute terms,” said Spencer Dale, chief economist at BP. At the same time, “the share of renewable energy grows more quickly than any fuel ever seen in history.”