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BP Energy Outlook: 30% growth in global demand to 2035; fuel demand continues to rise, even with EVs & fuel efficiency

The 2017 edition of the BP Energy Outlook, published today, forecasts that global demand for energy will increase by around 30% between 2015 and 2035, an average growth of 1.3% per year. However, this growth in energy demand is significantly lower than the 3.4% per year rise expected in global GDP, reflecting improved energy efficiency driven by technology improvements and environmental concerns. The Outlook looks at long-term energy trends and develops projections for world energy markets over the next two decades.

While non-fossil fuels are expected to account for half of the growth in energy supplies over the next 20 years, the Outlook projects that oil and gas, together with coal, will remain the main source of energy powering the world economy, accounting for more than 75% of total energy supply in 2035, compared with 86% in 2015.

Oil demand grows at an average rate of 0.7% a year, although this is expected to slow gradually over the period. The transport sector continues to consume most of the world’s oil with its share of global demand remaining close to 60% in 2035. However, non-combusted use of oil, particularly in petrochemicals, takes over as the main source of growth for oil demand by the early 2030s.

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The global car fleet doubles from 0.9 billion cars in 2015 to 1.8 billion by 2035. BP Outlook. Click to enlarge.

The possibility that the most important source of growth in oil demand in the 2030s won’t be to power cars or trucks or planes, but rather used as an input into other products, such as plastics and fabrics, is quite a change from the past.

—Spencer Dale, BP’s group chief economist

Natural gas grows more quickly than either oil or coal over the Outlook, with demand growing an average 1.6% a year. Its share of primary energy overtakes coal to be the second-largest fuel source by 2035. Shale gas production accounts for two-thirds of the increase in gas supplies, led by growth in the US. LNG growth, driven by increasing supplies in Australia and the US, is expected to lead to a globally integrated gas market anchored by US gas prices.

Coal consumption is projected to peak in the mid-2020s, largely driven by China’s move towards cleaner, lower-carbon fuels. India is the largest growth market for coal, with its share of world coal demand doubling from around 10% in 2015 to 20% in 2035.

Renewables are projected to be the fastest growing fuel source, growing at an average rate of 7.6% per year, quadrupling over the Outlook, driven by increasing competitiveness of both solar and wind. China is the largest source of growth for renewables over the next 20 years, adding more renewable power than the EU and US combined.

Emerging themes in an energy transition. The Outlook highlights a number of questions and uncertainties raised by the energy transition that is underway.

  • Oil: changing dynamics of demand and supply. All of the demand growth for oil in the period to 2035 comes from emerging markets, with China accounting for half. The transport sector accounts for around two-thirds of the growth in oil demand. Within that, oil demand for cars increases by around 4 million barrels per day underpinned by a doubling in the global car fleet.

    The number of electric cars is assumed to increase from 1.2 million in 2015 to around 100 million in 2035 (~5.5% of the global car fleet). The Energy Outlook constructs two illustrative scenarios to consider the impact of the broader mobility revolution affecting the car market, including autonomous cars, car sharing and ride-pooling.

    The impact of electric cars, together with other aspects of the mobility revolution, such as self-driving cars, car sharing and ride pooling, is one of the key uncertainties surrounding the long-term outlook for oil.

    —Spencer Dale

    The slowing rate of oil demand growth is contrasted by the abundance of global oil resources. The Energy Outlook speculates that the abundance of oil may cause low-cost producers, such as Middle East OPEC, Russia and the US, to use their competitive advantage to increase their market share at the expense of higher-cost producers.

  • Gas: the emergence of a global market. Gas continues to gain share from coal, helped by energy policies that encourage the shift in both industry and power generation. The main growth comes from China, Middle East and the US.

    In China, growth in gas consumption outstrips domestic production, so that by 2035 imported gas comprises nearly 40% of total consumption, up from 30% in 2015. In Europe, the share of imports rises from around 50% in 2015 to over 80% by 2035.

    The Outlook expects LNG supplies to grow rapidly to account for over half of traded gas by 2035. This increase is led by supplies from the US, Australia and Africa. Around a third of this growth occurs over the next four years as series of projects currently under development come on-stream.

  • Carbon emissions: the need for further policy action. Carbon emissions are projected to grow at less than a third of the rate seen in the past 20 years, by an average of 0.6% per year versus 2.1% per year, reflecting gains in energy efficiency and the changing fuel mix.

    If achieved, it would be the slowest rate of emissions growth for any 20-year period since records began in 1965. However, carbon emissions from energy use in the base case are still projected to grow throughout the period, by about 13%. This is far in excess of the IEA’s 450 Scenario, which suggests that carbon emissions need to fall by around 30% by 2035 to have a good chance of achieving the goals set out in Paris. The Outlook develops two alternative cases to explore the potential implications of a faster transition to a lower carbon environment.

Car growth drives fuel consumption despite efficiency and EVs. The Outlook forecasts a doubling of the global car fleet from 0.9 billion cars in 2015 to 1.8 billion by 2035 as rising incomes and improving road infrastructure boost car ownership. Within the same timeframe, the non-OECD fleet will triple—from 0.4 billion cars to 1.2 billion.

Overall, global demand for car travel roughly doubles over the course of the Energy Outlook.

The number of electric cars also rises significantly, from 1.2 million in 2015 to around 100 million by 2035 (5.5% of the global fleet). Around a quarter of these electric vehicles (EVs) are plug-in hybrids (PHEVs) and three-quarters are pure battery electric vehicles (BEVs).

A key driver of the pace at which EVs penetrate the global car fleet is the extent to which fuel economy standards are tightened. But EV penetration will also depend on a number of other factors, including battery cost; subsidies; the rate of improvement of conventional vehicle fuel efficiency; and consumer preference.

Even with efficiency improvements and EV switching, fuel demand continues to rise.

Fuel demand for use in cars continues to rise, despite efficiency improvements and EV switching.

In 2015, cars accounted for 19 million barrels per day (Mb/d) of liquid fuel demand—a fifth of global demand. All else equal, a doubling in the demand for car travel over the coming 20 years would lead to a doubling in the liquid fuel demand from cars. However, improvements in fuel efficiency reduce this potential growth significantly, by some 16 Mb/d).

The growth of electric cars also mitigates the growth in oil demand, but the effect is much smaller: the 100 million increase in the number of electric cars reduces oil demand growth by 1.2 Mb/d—less than a tenth of the impact of the gains in vehicle efficiency.

Overall, the increase in demand for car travel from the growing middle class in emerging economies overpowers the effects of improving fuel efficiency and electrification, such that liquid fuel demand for cars rises by 4 million barrels per day—around a quarter of the total growth over the Outlook.

Comments

Paroway

BP announces that they will continue to grow and hopes the investors believe that. This is news?

Lad

If the oil companies became energy companies and pushed clean energy instead of fossil fuels, the future wouldn't look so bleak for those of us who know climate change is real and smog kills people. But wait, there is one bright break-away huge oil company, TOTAL, who realize the problems and are moving toward clean energy. Unfortunately, all five of the International Oil Companies(IOCs) in the U.S. are anti-health and would rather play with people's lives by buying politicians and lobbying against change. The sad thing is they are damn good at it, especially Exxon. look who's in the White House.

SJC

Oil had a last gasp with Bush and Cheney, Exxon made record profits on record revenue when oil was $100+ per barrel. Guess where it is headed again.

Calgarygary

If Mexico decides to install solar panels on their side of the wall its probably bad news for oilcos.

JMartin

If the OilCos believed this they would be spending "bigly" on exploration. But they are not. So, who are they trying to convince, investors?

Lad

@JMartin:
Donald Trump has just ordered the pipelines from the tar sands built across the critical waterlands of North America. If Canada goes along, there will be plenty of oil for a long time that will fill the American refineries with high-cost sour crude which they are set up to process. The oil companies just take up where they left off by running sour crude and raising the price of fuel back up to record prices again. The Donald Trump/Tea Party Republican Congress era is shaping up to be a very unstable time in our history. Where is this all going? I fear the worse!

TM

One way to fight back: So if you haven't already, go get yourself a Leaf, Volt, Bolt, or Tesla (or some other stingy fuel user like the Prius).

SJC

XL is because the Koch brothers hate Venezuela, so they would rather have tar sands which will contaminate the aquifers farmers depend on.

Account Deleted

The oil is flowing regardless. Building the pipelines means it can be transported for 2 USD per barrel instead of spending 10 USD on trucks or 5 USD on rail wagons. We need these pipelines to lower cost and decrease the carbon footprint for transporting the oil. Tar sand is too expensive. These pipelines will end up transporting shale oil from Dakota and Canada instead.

That said PBs outlook is based on a technology status quo. That is not going to happen. We will see driverless cars that will decimate the capital life-cycle cost of making cars because they drive much more like a million miles. That will lead to a focus on making cars with low maintenance costs and fuel costs and long durability. In other words, BEVs will take over.

Calgarygary

BP appears to be depending on substantial growth in demand in China, India and Africa and expect declines in developed regions like NA, Europe and Japan. Given the alternative technologies available today and the bad air quality in places like Delhi and Beijing I'd view the growth projections with a fair degree of uncertainty, but if I'm and oil exec I'd probably put out the most optimistic projection reasonable. No need to alarm investors.

So far the president of TransCanada PL expressed optimism about going ahead with pipeline but said they needed to consult with oilcos given likely new conditions. It will be interesting to see if they do decide to go ahead with the project.

How the Keystone XL story plays out may give a good indication of what big oil co's are really thinking.

HarveyD

Time will tell if future ADVs will do as much good as forecasted.

Looking at multiple pile-ups of city buses-trucks-cars etc on our icy streets during the last few days, one can wonder? City and contracted workers do not want to get up at 4 h to spray salt and abrasives. Unions forbade? Automated drive salt and abrasive spreaders may have to come first.

Our young PM (Justin Trudeau) claims that Alberta tar sands will have to produce for another 100 years. Many more pipelines will have to be built. The very slow conversion to electrified vehicles may prove him correct.

Our new 55 mpg Toyota Prius HEV is not enough. We need a 133 mpge clean FC/PHEV (as soon as enough clean H2 stations are installed)

New self-contained ( L=7 ft x H =7 ft x D =3 ft) portable H2 stations with 15 Kg/h of compressed H2 capacity each will be installed by Toyota-Honda-Hyundai-Quebec-Hydro. A large truck can transport 8 to 10 factory built stations. These may be the proper solution where clean low cost electricity and clean free water are available.

solarsurfer

Solar fuels will negate alot of the crude demand. The economics for Solar production of hydrocarbons is both carbon neutral and cheaper. See JCAP at caltech, or even self production of hydrogen with Hypersolar in the back yard.
Elon Musk is determined to make it cheaper to put a roof built of solar tiles paying for itself. The demand for transportation fuels may increase but the portion drilled out of the ground will shrink as will production from overdrafting the resevoirs.

CheeseEater88

I think the pipeline will be much safer and much more efficient than trucking/trains.

Renewables will get to cost parody of petroleum.

The replacement of all petroleum by renewable sources is inevitable; but to rush to market a replacement is a bit foolish. Things come in time.

If the true cost of renewables is below that of fossil fuels, the market will trend that way, don't ever underestimate the power of greed.

Wind is going to have some interesting growth. Especially places where it can be off shore.(out of sight, near big cities)

Houses use a fraction of electricity EVs will use, a transition of the US vehicle fleet to EVs won't happen overnight.

Things like waste to fuels, are looking to be promising. coupled with 30+mile ev range from a plug in hybrid, the net emissions can be cut drastically and the cost can still be competitive. Most trips are short after all.

SJC

It is not the 50 mpg PHEV or the proposed 100 mpg PHEV it is how MANY people use them. When it is less than 1% 15 years after the first Prius then it does not do much good.

HarveyD

How many years (decades) it took to replace all horses and buggies?

How many decades (20+) it is taking to replace steamers with electric trains?

To convert from ICEVs to BEVs and FCEVs will take 5 to 10 decades?

Trees

Not all bad news. Carbon emissions has the slowed growth, .6% vs 2.1% during the time span. This is directly the result of better fuel and higher efficiency vehicles. This is the part that most skip over. Consumers want best value and best convenience. That will be the hybrid for foreseeable future. No one can determine the fate of hydrogen and battery technology. So, it's fruitless to dream of one day. The best transportation can do is the current course of action. Maximize efficiency and dilute oil with biofuel. Besides, it will take the grid forever to improve. Especially, when factoring in the situation within the global community.

SJC

It can take a while but according to some we all must drive EVs real soon now or else. The horse and buggy left tons of manure, there was reason to reduce disease in the cities.

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