BP PREDICTS that over the next 20 years, global energy demand will increase by a third, but lower-carbon fuels will grow faster than high-carbon fuels, beginning the low-carbon transition.
The oil giant has just launched the latest 2016 edition of its Energy Outlook, which looks at how the global energy market might change in the years running up to 2035. CEO Bob Dudley acknowledges in the introduction that adjusting to the low oil price is likely to be “painful” but is confident that the markets will rebalance, with lower oil prices raising demand and lowering supplies.
Despite the slowdown in China, BP expects that the world’s economy will continue to grow. In the ‘base case’, the most likely scenario, world GDP will more than double, but huge gains in energy efficiency will slow the rise in energy demand. For example by 2035, the demand for energy in the EU is predicted to be the same as it was 50 years ago, while the economy will be 150% larger.
Although renewable energy is predicted to grow around 6.6% annually between now and 2035, the Outlook says that the dominant form of energy will continue to be fossil fuels, which will still account for 80% of global energy supplies. Renewables will account for 9%, a significant rise from the 3% that renewable energy currently contributes to the mix. Renewables will account for a third of the expected growth in global power generation, with China expected to install more renewable energy than the EU and US combined.
Carbon emissions will continue to rise, by around a fifth by 2035, however the rate of the growth will slow. While the past 20 years has seen an average annual increase of 2.1%, over the next 20 years, this growth rate is likely to halve to just 0.9%. In order to meet targets, more action will be needed.
“As this year’s Outlook demonstrates, the world is going to continue to demand growing supplies of energy, but the mix of those supplies is changing and becoming less carbon-intense. However, further policy action may be necessary to meet international targets to limit carbon emissions,” said Dudley.
Dudley believes that carbon pricing will have an important role to play in providing incentives for companies to cut carbon emissions, not the first time he has endorsed such a move. In June 2015, Dudley, along with the CEOs of Europe’s five other largest energy companies – BG Group, Eni, Shell, Statoil and Total – wrote an open letter to the UK’s Financial Times, which called on world leaders to create a global carbon pricing system.
Such a move would likely discourage the use of heavily-polluting coal and oil and push users towards less carbon-intensive natural gas. In the Energy Outlook, BP expects that gas will indeed be the fastest-growing fossil fuel, increasing by 1.8%, driven by shale gas production. By 2035, it will replace coal as the second biggest energy source. While the rising global population will still cause an increase in overall use of coal, by 2035, it will contribute just 25% of the world’s energy demands, the lowest since the Industrial Revolution, with growth around a fifth of the rate over the past 20 years, according to BP group chief economist Spencer Dale.
However, oil will remain the biggest contributor to the energy mix, as the number of vehicles on the planet is expected to more than double by 2035. China will be the world’s biggest oil consumer by 2035, overtaking the US, although this is largely due to population growth. The per capita consumption in China will still be just 27% of US consumption.
“In the middle of a downturn in oil and gas prices, it is important not only to adapt to the current tough conditions, but also to prepare for the next set of challenges. Energy is a long-wavelength industry and we need a long-term perspective of how the energy landscape we operate in is likely to evolve,” said Dudley.
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