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The biggest argument for the oil break | OilPrice.com

It’s been two years since the British oil and gas supermajor BP Plc. (NYSE: BP ) dramatically declared that the world has already outgrown the demand for oil. In society Energy outlook for 2020CEO Bernard Looney promised BP would increase its spending on renewables twentyfold 5 billion dollars per year by 2030 and “… not to enter any new country for oil and gas exploration”. The announcement came as a bit of a shock given how aggressive BP has been in exploring new oil and gas frontiers.

When many analysts talk about peak oil, they usually mean the point in time when global oil demand enters a phase of terminal and irreversible decline. According to BP, that point has already come and gone, with oil demand expected to fall by at least 10% in the current decade and by as much as 50% over the next two. BP noted that historically, energy demand has grown steadily in tandem with global economic growth with few interruptions; however, the COVID-19 crisis and increased climate action may have permanently changed this guide.

However, BP was forced to do a My fault after it emerged that the COVID-19 pandemic, which began more than two years ago, has not led to a significant reduction in oil demand.

In his Energy outlook 2022 editionBP revised its forecast for global economic growth downward, saying global GDP would shrink by just 1.5% from 2019 levels by 2025, compared with an earlier projection of a 2.5% decline.

BP notes that its earlier gloomy outlook was drawn up ahead of Russia’s invasion of Ukraine – another black swan event – which has driven up global energy prices in recent months and cast an uncertain shadow over Russia’s oil and gas sector.

BP has predicted that oil demand will fall by 74% between 2021 and 2050, with global oil demand reaching just 24 million barrels per day by 2050. International Energy Agency (IEA) has issued a similar forecast under a net-zero scenario, although its trajectory for how the world will get there differs from BP’s. But BP is by no means the most bearish on global oil demand in three decades Energy Watch Group predict that demand for oil will virtually disappear by that date.

Below is the table posted Energy Intelligence Group which compares oil demand forecasts from 28 organizations including a handful of major oil companies.

Demand for oil until 2050

(million b/d)

Top

2030

2040

2050

2021-50

Energy Watch Group (0 GT)

<2021

72

31

0

-100%

UNPRI 1.5 (2 GB)

2025

88

46

20

-79

IEA Net-Zero (0 GB)

<2021

72

43

24

-74

BP Net-Zero (2 GB)

<2021

90

55

24

-74

UNPRI Forecasting Principles (9 Gt)

2026

99

63

37

-61

IPCC Low Overshoot 1.5°C (1 Gt)

<2021

86

63

41

-56

A total rip off

<2021

88

59

41

-56

Equinor Rebalance (9 GB)

<2021

88

61

46

-51

BP Accelerated (10 GB)

2025

96

72

47

-50

IPCC 1.5°C High Overshoot (6 Gt)

<2021

99

78

53

-44

DNV (19 GB)

2024

85

69

49

-48

IEA Sustainable Development (8 GT)

<2021

88

65

57

-39

Total momentum

<2021

94

74

63

-33

IPCC 2 °C (14 Gt)

2030

100

88

70

-26

IEA announced pledges (21 Gt)

2030

96

84

77

-18

BP New Momentum (31 Gt)

2030

101

92

81

-14

Equinor Reform (24 GB)

2030

100

92

84

-11

Shell Sky 1.5 (18 GB)

2025

100

94

85

-10

IPCC 2.5 °C (29 Gt)

2040

105

107

99

+5

Shell Islands (34 GB)

2040

102

104

102

+8

IEA base (34 GB)

2040

103

104

103

+9

IPCC 3 °C (38 Gt)

2040

104

108

106

+13

Exxon

>2040

104

107

107

+14

Oven (34 GB)

>2045

107

108

108

+15

Equinor Rivalry (32 GB)

>2050

107

110

110

+17

IPCC 4 °C (52 Gt)

2040

107

111

111

+18

Shell Waves (35 GB)

2040

111

119

111

+18

US EIA (43 GB)

>2050

109

117

126

+34%

Projected 2030–50 oil demand in millions of barrels per day under a range of scenarios. Where available, projected CO2 emissions in billions of tonnes are shown in parentheses (2021: 34 Gt). Source: BP, DNV, Equinor, EWG, Exxon Mobil, IEA, IPCC, Shell, TotalEnergies, UNPRI, US DOE

Source: Energy Intelligence Group

You will notice that no less than 10 organizations, incl OPEC, ExxonMobil (NYSE: XOM) a Energy information management (EIA) predicted that global oil demand will actually increase and not decrease as most analysts predict.

Related: America’s energy bills are on the rise this winter

To be fair, it’s hard to be bullish on the long-term trend in oil demand, given that climate mandates are unlikely to be eased, which, along with the explosion of electric vehicles and the rapidly increasing efficiency of gas-powered vehicles, will certainly limit oil consumption. . The Intergovernmental Panel on Climate Change (IPCC) indeed recently warned that keeping a warming limit of 1.5ºC or even 2ºC in sight will require a major strengthening of current policies. In fact, Paris-compliant energy scenarios assume that oil and gas demand will decline by 40% to 80% and 20% to 60% by 2050, respectively, while gas demand must peak between 2025 and 2030.

Meanwhile, a number of innovations such as direct gasoline injection, turbocharged engines, multi-ratio automatic transmissions, and stop/start systems that shut down the engine instead of letting it idle have dramatically improved the new vehicles’ fuel economy.

New American cars now travel nearly twice as far per gallon as they did at the start of the Obama administration, while light trucks and SUVs have increased efficiency by a more modest 59%. About 26% of oil production is consumed by the transport sector.

EVs may pose an even greater threat to the fossil fuel industry in the long run.

According to Bloomberg New Energy Finance (BNEF), electric and fuel cell vehicles already subtract about 1.7 million barrels per day from global consumption, but will move a whopping 21 million barrels per day in oil demand by 2050. BNEF estimates that demand for road heating oil will peak in 2027, but it will take another decade for the impact of advances to be felt significantly. Emissions will be almost halved by 2050, but the sector will still not be close to net zero. At best, by the 1950s demand for fossil fuel-derived road fuels will fall below levels last seen in the early 1970s. In this case, oil-related emissions will drop to 3.4 gigatons of CO2 by 2050, from nearly 6.5 Gt in 2019.

Overall, oil demand may remain stable or even grow appreciably over the next few years, perhaps until 2030. But the long-term outlook looks bleaker, depending on who you listen to.

Alex Kimani for Oilprice.com

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