Global oil demand will prove resilient over the next two decades even if ambitious targets set in the Paris climate change accord are met and the adoption of renewable energy is “off the charts”, according to BP’s annual energy outlook. In a “rapid transition” to a lower-carbon world, demand for crude would only drop 20 percent by 2040 even with the most efficient use of energy by industry and buildings, increased electrification of transport and radical policies to clean up the power sector.
“Oil is playing a major role in the energy system out to 2040 … even with renewables off the charts,” said Spencer Dale, chief economist at the energy major. “The level of understanding about the arithmetic on some of this stuff is not as high as it could be.” The question of how quickly the use of fossil fuels will be eclipsed by renewable energy has become a pressing issue for the oil industry, investors and major petro-states such as Saudi Arabia.
BP, one of the world’s largest oil producers, said in its widely watched report published on Thursday that oil and gas would still meet half of the world’s energy needs even in a scenario where bold moves were made towards cleaner energy. Even in this so-called rapid transition where the Paris goals are met, renewables expand to meet a third of global energy consumption and coal use contracts sharply, BP expects to thrive. The outlook offers clues to the company’s strategy. BP is under pressure to prove that its business is compatible with a push to limit global temperature rises to less than 2C, a stipulation by investors who have demanded more disclosure on climate risk.