BP warns oil demand won’t recover from Covid damage

Oil consumption may never return to levels seen before the coronavirus crisis took hold, oil major BP said in a report yesterday.

The oil giant, headed by Kerryman Bernard Looney, is the first so-called supermajor to call the end of an era many thought would last another decade or more.

Even its most bullish scenario, BP sees demand at no better than “broadly flat” for the next two decades as the energy transition shifts the world away from fossil fuels.

The BP report describes a near future, where oil’s supremacy is challenged and ultimately fades.

That explains why BP has taken the boldest steps so far among peers to align its business with the goals of the Paris climate accord.

Just six months after taking the top job, Mr Looney said in August he’d shrink oil and gas output by 40pc over the next decade and spend as much as $5bn a year building one of the world’s largest renewable-power businesses.

That’s because he suspects oil use may already have peaked as a result of the pandemic, stricter government policies and changes in consumer behaviour. BP’s energy outlook shows consumption slumping 50pc by 2050 in one scenario and by almost 80pc in another.

In a “business-as-usual” situation, demand would recover but then flatline near 100m barrels a day for the next 20 years.
ADVERTISEMENT

Learn more

BP isn’t the only big oil company adapting its business to the energy transition. Royal Dutch Shell, Total and others in Europe have announced similar pivots.

BP’s report comes ahead of three days of online briefings starting Monday on its clean-energy and climate strategy.

The study considers three scenarios, which aren’t predictions but nevertheless cover a wide range of possible outcomes over the next 30 years and form the basis of the new strategy Mr Looney announced in August.

The ‘Rapid’ approach sees new policy measures leading to a significant increase in carbon prices.

The ‘Net Zero’ course reinforces Rapid with big shifts in societal behaviour, while the ‘Business-as-usual’ projection assumes that government policies, technology and social preferences continue to evolve as they have in the recent past.

In the first two scenarios, oil demand falls as a result of the coronavirus, the report shows. “It subsequently recovers but never back to pre-Covid levels,” according to Spencer Dale, BP’s chief economist. “It brings forward the point at which oil demand peaks to 2019.”

That contrasts with what many others are forecasting. Russell Hardy, chief executive officer of trading giant Vitol Group, said on Monday that oil demand is poised for 10 years of growth before a steady decline.

He predicts consumption will return to pre-virus levels by the end of next year.

The research sees renewable energy – excluding hydro – increasing, with its share in primary energy rising from 5pc in 2018 to more than 40pc under its ‘Rapid’ scenario by 2050 in and to almost 60pc in ‘Net Zero’.

Rakteem Katakey

source:independent.ie