Oil demand is expected to peak next year and fossil fuels will decline to about two-thirds of the global energy mix by 2050 as renewable power grows rapidly, based upon current climate policies, according to BP.
In its latest energy outlook report, the energy giant said that increasing efficiency of internal combustion engine vehicles and then a more rapid rise in electric cars and trucks on the road would drive oil demand to reach the top in the middle of this decade.
The share of oil within the overall energy mix would decrease from about a third in 2022 to about a quarter by 2050 under the currency trajectory and to a little over 10 per cent under a net zero scenario.
The current trajectory scenario is based on climate policies and carbon reduction pledges already in place. The net zero scenario assumes a significant tightening of climate policies aligned with the 2015 United Nations-backed Paris climate agreement to cut the world’s carbon emissions by about 95 per cent by the middle of the century.
Growth in oil demand since 2019 — which has averaged about 500,000 barrels a day a year — has been largely driven by increasing consumption in emerging economies and increased demand for petrochemicals like diesel and jet fuel, BP said. Consumption in developed markets has continued to slip for most of the past two decades, having fallen by about two million barrels a day in 2022, compared with the pre-pandemic level and 5.5 million barrels a day below the 2005 peak.
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Carbon emissions, caused primarily by the burning of fossil fuels, also peak in the mid 2020s in both of BP’s scenarios.
Investment in oil and gas production totalled $550 billion last year, according to BP’s research, well below its peak at the start of the last decade, helped by better productivity.
BP argues that energy demand is set to be 5 per cent higher than the 2022 level by 2050 under the current trajectory, increasing out to the mid-2030s before plateauing, but about 25 per cent lower under a net zero scenario mapped by BP. Chinese demand peaks in the mid-to-late part of this decade in both scenarios, before falling to around 15 per cent and 35 per cent below 2022 levels by 2050 under the current trajectory and net zero scenario, respectively.
Renewable power sources will grow the fastest, more than doubling by 2050 in the current trajectory and increasing more than threefold under net zero, growing from just over 10 per cent in 2022 to more than a quarter of global energy supply by 2050 and more than half of all primary energy in net zero.
The growth will mean that fossil fuels decline from about 85 per cent of energy in 2022 to about a two-thirds on the current trajectory and a third by 2050 under net zero.
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The largest falls occur in the share of coal, as the world shifts towards lower carbon fuels in industry and power. By 2050 coal consumption is between 35 and 85 per cent lower in the two scenarios.
Spencer Dale, BP’s chief economist, said: “The world is in an ‘energy addition’ phase of the energy transition in which it is consuming increasing amounts of both low carbon energy and fossil fuels.”
The challenge is to move, for the first time in history “to an ‘energy substitution’ phase”, he said, in which low carbon energy increases sufficiently quickly to more than match the increase in global energy demand.
“This occurs only when the growth of the ‘new’ energy — this time low carbon energy — exceeds the increase in total global energy demand, so that the use of the ‘old’ energy — in this case unabated fossil fuels — declines in absolute terms,” he said.
Global energy demand has continued to grow, averaging about 1 per cent a year per year between 2019 and last year, BP said, although that is below an average rate of a little below 2 per cent over the previous decade.
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While the investment in renewable energy sources like wind and solar have risen during that time, it has not been enough to meet the increase in demand, it said. Fossil fuels have filled the gap, consumption of which reached a fresh high last year, driven by increased oil demand.
