Peak Oil Consumption May Be a Thing of the Past

BP’s Annual Energy Outlook

Demand for fossil fuel has been on the rise in developed and emerging markets for the past century, but that trend may be gone for good. Earlier this week, BP published its annual energy outlook, which showed that the COVID-19 pandemic may be accelerating a permanent shift away from fossil fuels.

The company’s report last year forecasted that oil consumption would rise steadily over the next decade, and peak in the 2030s. However, now analysts say that oil demand may never again reach 2019 levels of 100 million barrels per day.

Three Different Scenarios

BP outlined three different scenarios in its report. In the first, oil demand will recover from COVID-19, but will plateau in the 2020s because of energy policies and changing consumer preferences.

The next scenario outlines how new policy measures could be put in place which would raise the price of carbon emissions and cause demand for oil to drop by almost 50% by 2050. In the final scenario, consumer demand and government policies could result in an 80% drop in oil demand by 2050. This last scenario would be necessary for achieving Paris Climate Agreement goals.

Investing in Alternative Energy

BP is making big changes to its business model. The company plans to decrease oil production by 40% over the next decade, and to increase renewable energy spending tenfold. For example, last week the company invested $1.1 billion in Equinor, a wind power company. BP aims to achieve net-zero emissions by 2050.

The world appears to be moving away from fossil fuels. A decade ago, ExxonMobil (XOM) was the most valuable company in the world, but today, EV maker Tesla (TSLA) is about twice its size. This trend seems to have been accelerated by the COVID-19 pandemic, according to BP’s research. Because of this pattern, some fossil fuel companies are changing their business models to become more green.

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