London, 20 February (Argus) — Global demand for oil, biofuels and other liquid fuels will plateau in the late 2030s under the main scenario of BP's latest Energy Outlook, published today.
BP describes it as the "evolving transition" (ET) scenario, which assumes government policies, technologies and societal preferences evolve in a similar way and at a similar pace to the recent past.
The outlook offers a variety of alternative scenarios. This marks a departure from BP's previous outlooks, which have focused on a base case scenario outlining the "most likely" path for energy markets.
The ET scenario "is doing the same work as the new policies scenario does for the IEA", chief economist Spencer Dale said. "It is giving you a sense of the path we are evolving along, absent a big shock to technology and absent a big shock to policy."
Liquids consumption is around 109mn b/d in 2040 under the ET scenario, up by 13mn b/d from 2016. Demand continues to increase for most of the period, driven by rising prosperity in emerging economies. But "we have a very small decline in the final five years of the outlook", Dale said. "The key factor here is transport becoming increasingly efficient," he said.
The transport sector accounts for over half of the 13mn b/d of demand growth, with non-road vehicles and trucks accounting for the majority of that. "But the stimulus from transport demand gradually fades as the pace of vehicle efficiency improvements quickens and alternative fuels penetrate the transport system," BP said.
Liquids consumption in the transport sector stops growing towards the end of the outlook. The non-combusted use of oil — particularly as a feedstock for petrochemicals — replaces transport as the main source of demand growth after 2030. This reflects "the more limited scope for efficiency gains", BP said.
Demand for travel by cars more than doubles by 2040 in the ET scenario. But liquids consumption by cars is broadly flat compared with 2016, mainly because of tightening emissions standards. The switch to electric vehicles, together with increased use of shared-mobility cars, reduces consumption by a combined 4.5mn b/d over the outlook period. But this is "not a game-changer for oil demand", Dale said. Other gains in fuel efficiency have a much more significant effect.
BP has included a scenario in which the sale of all internal combustion engine vehicles, including plug-in hybrids, is banned globally from 2040. This reduces 2040 liquids demand by around 10mn b/d compared with the ET scenario. But overall consumption is still higher in 2040 than in 2016 under this scenario.
On the supply side, BP's ET scenario envisages the US and Opec dominating growth. US tight oil underpins supply increases in the first half of the outlook period, and peaks at almost 10mn b/d in early 2030s. Total US liquids production, including natural gas liquids, plateaus at 23mn b/d around the same time. Opec's Middle East producers drive output growth from the late 2020s.
"The abundance of global oil resources is assumed to prompt Opec members to reform their economies, reducing their dependency on oil and allowing them gradually to adopt a more competitive strategy of increasing their market share," BP said.
Opec output increases by around 6mn b/d by 2040 under the ET scenario. Non-Opec supply rises by 5mn b/d, with higher production from the US, Russia and Brazil more than offsetting declines in higher-cost regions.
BP offers a couple of alternative scenarios for US supply, given the significant uncertainty about the pace and duration of tight oil growth. One possibility is that the availability of finance allows a more rapid expansion, causing tight oil output to peak at around 12mn b/d but decline more rapidly than in the ET scenario. Another is that recoverable US tight oil resources are higher than in the ET scenario, "perhaps enabled by stronger productivity gains". US tight oil production could grow to around 15mn b/d by 2030 under this scenario and remain at that level for the rest of the outlook period.