BP’s new chief executive said the coronavirus hit to crude consumption was likely to endure beyond the pandemic – and may even have ushered in “peak oil” demand. Bernard Looney, who took the top job at the UK energy major in February, told the Financial Times that the Covid-19 crisis was only “adding to the challenges of oil in the years ahead”, as travel bans and lockdowns slash consumption by a third from pre-crisis levels of roughly 100m barrels a day.
“It’s not going to make oil more in demand. It’s gotten more likely [oil will] be less in demand,” Mr. Looney said, noting that the use of technology that enables remote working, cutting the need for travel, could persist. “I don’t think we know how this is going to play out. I certainly don’t know,” he said. “Could it be peak oil? Possibly. Possibly. I would not write that off.” The oil industry is assessing how much of the slump in demand sparked by coronavirus may become permanent. BP said last year it expected consumption to grow over the next decade before plateauing in the 2030s.
BP, which derives the bulk of its cash from oil, reported a 66 per cent drop in earnings in the first quarter and like other supermajors has been forced into cash conservation mode. It has issued billions of dollars in debt, cut spending and delayed project approvals to preserve dividend payouts, which analysts believe have become unsustainable. The company is facing its latest crisis just as Mr Looney seeks to overhaul its business model and longer-term strategy for a world that demands fossil fuel companies to take more accountability for climate change. 66% BP’s percentage drop in earnings in the first quarter
He said the pandemic had bolstered his “personal conviction” of the need to shift strategy. BP is expected to invest more in low-carbon energy and less in hydrocarbons as part of a new pledge to become a net-zero emissions company by 2050.
Mr Looney noted that as crude prices have plunged, renewable energy projects had been able to attract funding, suggesting the pandemic has weakened the investment case for oil. “It’s the model that is increasingly respected and admired by investors as being resilient and having a different risk profile,” he said.
BP’s board wants to present a renewed approach at its annual meeting this month after last year’s gathering saw the company at odds with investors who demanded targets on emissions and greater disclosure on how the business aligns with the Paris climate goals.