Electric cars will not stem global demand for oil
The oil and gas giant predicted that despite electric cars spreading rapidly and renewable energy recording exceptional growth, oil demand would still rise because of rising prosperity in the developing world. BP said electric cars would not be a “gamechanger” for the oil industry.
“It’s not Teslas and the US. It’s the fact that 2 billion people, much of that in Asia, are moving to middle incomes, can buy their first motor car and that drives up oil demand. It’s that stuff that really matters,” said Spencer Dale, BP group’s chief economist.
Publishing its energy outlook, which forecasts long-term trends and informs the company’s internal strategy, BP predicted global energy demand would grow nearly a third by 2035. Fossil fuels would still account for 75% of the energy mix, slightly down on the 80% BP forecast last year.
Oil demand was unlikely to peak until the mid-2040s, Dale said, in a prediction similar to that of the International Energy Agency but much later than some other observers think. The analysts Wood Mackenzie believe oil demand could “peak well before 2035”, while BP’s rival Shell has talked of a peak as soon as five years’ time.
BP has been attacked in the past for repeatedly underestimating the growth of wind and solar power in its annual outlook. Its latest update expects renewables to be the fastest-growing fuel source in coming years, at 7.6% annually, compared with 1.6% for gas and 0.7% for oil, with China driving the largest growth in green energy.
Greenpeace accused the company of peddling a “fantasy future where the world fails to act on climate change”. Greg Muttitt, senior adviser at campaign group Oil Change International, said: “Every year BP has predicted a slowdown in renewable energy growth, and every year it has been wrong – but it’s done so again today. And BP says electric cars are going nowhere in the next 20 years, a view not shared by the car industry.”
Some forecasts, such as Bloomberg New Energy Finance’s, see more than 200m electric cars globally by 2035. BP’s base case foresees 100m electric cars by then, or 5% of the global car fleet. That’s up from 57m in the company’s outlook last year because of falling battery prices, although BP admitted there was a large uncertainty over the numbers.
“BP’s 2017 outlook has increased its electric vehicle projections on last year, but this still lags far behind the potential penetration if the technology were to take off, meaning there is still a risk of the company misreading oil demand,” said James Leaton, head of research at the Carbon Tracker Initiative, a London-based thinktank.
BP said the election of Donald Trump as US president and his domestic “America First” pro-fossil-fuel energy plan, published last week, was unlikely to have a big impact on efforts to tackle climate change. But a withdrawal from the Paris climate deal – as Trump has promised – would be more serious.
“My instinct would be in terms of climate, the actual implications of changes in US policy are unlikely to be a big gamechanger,” said Dale. “But what could be a big gamechanger is if the US stops playing its global leadership role, and by stopping it then has significant implications for the wider international community, and the wider commitment, that could have more impacts.”
The energy company said the future held “an increasing abundance of oil”, claiming there is enough technically recoverable oil in the ground to meet the world’s entire demand twice over to the middle of the century. But it is not clear how much of that would be economically possible to extract, and the company does not disclose the oil price underpinning its forecasts.
An Opec deal reached last year by the world’s largest oil producers to curb production has helped the oil price recover from $30 a barrel last year to about $55 today. Dale would not be drawn on what he thought the price would be in 2035 but said he did not think the current level was sustainable.
“I look at what’s happening with investment, with those major oil-producing economies, that [today’s price] doesn’t look like a very sustainable number,” he said.
The outlook predicted coal’s ongoing decline would see gas overtake it as the world’s second largest source of energy by 2035, with fracking for US shale driving much of the gas growth.
BP said improvements in energy efficiency and an increasingly lower carbon fuel mix would slow the growth in global carbon emissions, from the 2.1% annual growth of recent years to 0.6% in the next two decades. While describing that as “good news”, it admitted this still put the world on a path to dangerous global warming.