- An energy outlook report published by BP on Monday suggests oil demand may never return to its 2019 peak and could halve over the next three decades.
- The oil market has failed to fully rebound through the coronavirus crisis as weakened travel activity slams consumption.
- BP laid out three scenarios in its report for how liquid fuel demand could trend through 2050.
- The firm’s most bullish scenario sees consumption climbing slowly to 2030 before falling over the following two decades.
- It’s most bearish hypothetical â€” which includes major shifts in policy and societal behaviour toward renewable energy use â€” sees fuel consumption failing to retake its pre-pandemic high and tanking more than 60% by 2050.
- For more stories like this, sign up here for our weekly energy newsletter, Power Line .
The world’s most traded commodity has failed to stage the same rapid rebound seen in other markets. While investors pushed stocks to record highs as the coronavirus pandemic raged, those monitoring the oil market found new signs of lasting demand weakness. Most recently, OPEC cut its 2021 demand estimate by 1.1 million barrels per day on softer consumption estimates.
BP went a step further. While many estimates see oil consumption growing for years after the coronavirus threat fades, the industry giant’s best-case scenario calls for relatively stagnant demand over the next two decades before a steady decline. In its most bearish estimate, global demand will nosedive through the 2020s and halve by around 2045.
Paul Lambert returned 45% to investors in 2019 and is crushing the market again this year. The solo fund manager lays out his strategy for finding winning stocks â€” and shares 5 of his top picks today.
“The global energy system is likely to undergo a fundamental restructuring in order to decarbonize, which will create challenges and opportunities for the industry,” the company said.
BP detailed three scenarios for global fuel consumption through 2050. The company’s “Business-as-usual” hypothetical assumes policy actions, consumer behaviours, and technological innovations toward green energy continue at their current pace. Carbon emissions from energy use would decline less than 10% from their 2018 peak to 2050, according to the report.
The “Business-as-usual” scenario reflects BP’s most conservative forecast and still sees demand only slightly growing to a peak in 2030. By 2050, OPEC producers would dominate the market but demand would be on a steady decline.
In the firm’s “Rapid Transition” scenario, a series of policy measures and sharp increase to carbon prices lead to a quick shift to green energy initiatives. Carbon emissions from energy use would sink 70% by 2050. Fuel consumption would slide by nearly 50% over the next three decades and never retake its 2019 high, BP said.
Finally, BP’s “Net Zero” scenario assumes the policy measures enacted in “Rapid” are reinforced by a societal shift in behaviour and preferences. Companies and communities alike would work to create an almost completely renewable energy industry, and carbon emissions from energy use would crater 95% by 2050. Liquid fuel consumption would follow the same path as seen in the “Rapid” scenario until 2030. After that, demand would slouch more than 60% through 2050.
Click here to subscribe to Power Line
, Business Insider’s weekly energy newsletter.
BP stressed its scenarios aren’t predictions, and instead are hypotheticals meant to “illustrate the range of outcomes possible over the next thirty years.” Uncertainty around the oil market’s recovery “is substantial” and the company’s scenarios don’t include all possible outcomes, BP added.
The three scenarios vary significantly from BP’s forecast just one year ago. The producer included a hypothetical named “More energy” in its previous report, which called for demand to strengthen to 130 million barrels per day in 2040 from the recent peak of roughly 100 million. Other producers continue to hold such bullish outlooks, anticipating the coronavirus’ containment will drive a complete recovery for the travel and transportation industries.
Both the BP report and OPEC’s lowered outlook weighed on oil futures in Monday trading. West Texas Intermediate crude sank as much as 1.4%, to $US36.82 per barrel. Brent crude, oil’s international standard, fell 1.3%, to $US39.31 per barrel, at intraday lows.
Now read more markets coverage from Markets Insider and Business Insider:
‘The psychology is even more dangerous than 20 years ago’: A Wall Street investment chief says stock valuations are giving him dot-com bubble flashbacks â€” and warns of a major meltdown in the next year