BP sees a future of slowing oil demand growth, abundant supplies
LONDON (Bloomberg) -- Oil demand growth will slow and supplies will remain abundant in the coming decades, meaning producers in the Middle East, Russia and U.S. will continue to gain market share at the expense of higher-cost rivals, said BP.
Demand for oil will expand at an average of 0.7% a year over the next two decades, little more than half the rate in the preceding 20 years, BP said on Wednesday in its Energy Outlook 2035 report. By the early 2030s transport will cease to be the main driver of growth, a significant departure from the historical trend.
“The most important source of growth in oil demand in the 2030s won’t be to power cars or trucks or planes, but rather used as an input into other products, such as plastics and fabrics,” BP’s Chief Economist Spencer Dale said in a statement. That would be “quite a change from the past.”
The expansion of electric cars, increasing energy efficiency and more renewables will also affect oil demand. Were these trends to continue, oil demand could peak in the mid 2040s, Dale said. That could change depending on the pace at which electric vehicles and renewables are adopted, he said.
The world has enough oil reserves that can be extracted with current technologies to be able to meet demand two times over until 2050, Dale told reporters in London. As demand growth tapers, holders of these resources could potentially decide to produce sooner rather than later, he said.
Abundant Reserves
“Over the long run, there seems to be increasing incentive for those producers that hold lots of low-cost oil” to rethink the strategy of rationing production, Dale said. “The view that a barrel not be produced today, but produced tomorrow,” may become less compelling, he said.
The Organization of Petroleum Exporting Countries and 11 other major producers agreed last month to cut production by a combined 1.8 MMbopd over six months in order to eliminate an oversupply and boost prices.
The world has about 2.6 Tbbl of technically recoverable oil reserves, with about 1.7 Tbbl located in the Middle East, North America and the former Soviet Union, BP said in the report. Cumulative oil demand out to 2035 is expected to be around 0.7 Tbbl, significantly less than recoverable oil in the Middle East alone, Dale said.
Global oil demand grew at an average annual rate of 1.3% from 1995 to 2015, BP said. All of the predicted 0.7% a year growth to 2035 will come from emerging economies, with China accounting for half the increase, it said.
