Proactive Investors - BP PLC has cut its long-term oil demand forecasts as countries seek greater energy security following Russia’s invasion of Ukraine last year.
The oil giant suggested the war had boosted the global shift to cleaner, domestic sources of energy, forecasting daily demand for oil to be 93mln barrels a day in 2035, down 5% on last year’s estimate of 98mln, and slightly below 2019 demand, which sat just shy of 100mln barrels.
“The increased focus on energy security as a result of the Russia-Ukraine war has the potential to accelerate the energy transition,” said BP’s chief economist, Spencer Dale.
Investments in low-carbon energy technology surpassed US$1trn for the first time in 2022, up nearly 18% from US$849bn in 2021, according to Bloomberg New Energy Finance research.
However, BP’s forecasts suggest the world is still lagging behind in its efforts to meet 2050 net zero emissions targets and that oil will remain key to the global energy supply.
Bloomberg analysts agreed, commenting: “Global investment in lower-carbon technologies remains woefully short,” if countries are to meet targets.
“By comparison, the world must invest an annual average of US$4.55trn for the remainder of this decade in order to get on track,” they added.
BP’s New Momentum scenario, based on current trends, suggests oil demand will likely plateau in the mid-2020s before gradually falling from 2030, mainly driven by the shift to electric vehicles.
Global emissions will have only reduced by 30% in 2050 from 2019 levels in this case though, instead of the 95% required for net zero.
It added the US Inflation Reduction Act, which largely supports low-carbon technologies, and lessening reliance on liquified natural gas in Europe could be catalysts in accelerating the transition.
In December, the International Energy Agency dubbed the Ukraine war a “decisive moment” for renewable energy in Europe, suggesting it had forced countries to move away from Russian oil and gas.
“The recent energy shortages and higher prices highlight the importance of the transition away from hydrocarbons being orderly” though, BP warned, with the use of biofuels, hydrogen and carbon capture all set to be central, alongside renewables.