Global oil giant BP has released this year’s energy report to kick off a 3-day conference, and wow –– it’s something. The Guardian has a great article on it, so let’s dig into what they’re predicting:
BP has called time on the world’s rising demand for fossil fuels after finding that demand for oil may have already reached its peak and faces an unprecedented decades-long decline.
Demand for oil may never fully recover from the impact of the coronavirus pandemic, according to the oil firm, and may begin falling in absolute terms for the first time in modern history.The Guardian
Bullish outlook from one of the world’s largest oil companies.
BP’s influential annual report on the future of energy, published on Monday, says oil will be replaced by clean electricity from windfarms, solar panels and hydropower plants as renewable energy emerges as the fastest-growing energy source on record.The Guardian
Wait a minute BP –– you’re telling me that oil will be replaced by renewable energy? Who could have predicted that?
The report in effect sounds a death-knell for the growth of global oil demand after two of the report’s three energy scenarios for the next 30 years found that demand reached a peak in 2019.
In BP’s third scenario, showing a world in which climate action does not accelerate, oil demand plateaus at similar levels seen in 2019 through the 2020s before declining from 2035.
The report has confirmed a chorus of warnings from independent energy economists that the impact of coronavirus will bring forward the start of the oil industry’s terminal decline from the end of the decade.The Guardian
“Our analysis found that we’re completely fucked. Our terminal decline started last year”
The energy transition could be even quicker if global governments choose to spur a green economic recovery from the coronavirus crisis. A boom in economic stimulus packages for low-carbon industries, which is expected by many energy experts, was not taken into account in the report because this outcome is “not inevitable”, according to Dale.The Guardian
Are you telling me this is the pessimistic scenario?!
Don’t be too hard on yourselves oil and gas industry. I mean, what are the chances governments around the world will support the transition to renewable energy? People aren’t going to want clean air.
He will present BP’s energy vision to the company’s investors on Monday as part of a three-day event outlining the company’s plan to become a carbon neutral energy company by 2050, which is one of the most ambitious energy transition plans set out by any large oil company.The Guardian
Imagine being a BP shareholder at this meeting, where the company tells everyone the business is in “terminal decline” and renewables are the future. I’m guessing more than one person will decide to sell some BP and buy some TSLA before this 3-day conference is over.
“In all three of these scenarios the share of renewable energy grows more quickly than any energy fuel ever seen in history,” Dale said.The Guardian
Well sure, it’s growing faster than any energy fuel ever seen in history, but that won’t affect the fossil fuel industry… would it?
The shift towards electric vehicles will also take its toll on demand for oil. In all three scenarios the report found that the use of oil in transport would reach a peak in the mid- to late 2020s due to the shift towards electric cars and hydrogen-powered vehicles.The Guardian
Mid 2020s? So… now? Also, hydrogen cars are for morons. Even Trevor Milton agrees on that.
But I’m sure the oil industry can find some other use for all that crude, like plastic or something. Right?
Another factor dragging on the forecasts for oil demand in the coming decades are new measures to limit the production of plastic, which is manufactured using petrochemicals produced from fossil fuels, through more recycling and less single-use plastics.The Guardian
“God damnit. You’ve gotta be kidding me” –– Global oil industry
The effect may be an upending of global energy market dynamics, according to BP. The report expects members of the Opec oil cartel, led by Saudi Arabia, to bear the brunt of the decline in demand while US shale rigs take a greater share of the global oil market over the next decade. It may also usher in an era of more diversity in energy where no one source dominates the energy landscape, and all are forced to compete to maintain a significant share of the market.The Guardian
That’s kind of a self-serving prediction, but ok. Saudi Arabia depends on oil revenue more much more than the United States does, but they’ll probably be able to continue production profitably much longer than anyone else since they can pump out a barrel of oil for around $2 –– the lowest production cost in the world.
The Case for Secular Growth
BP’s report presents a strong case for secular growth in the market for renewable energy and sustainable transport in the coming decades.
Take a company like Tesla for instance: So much of the discussion about the company focuses on things like quarterly sales and production goals, product milestones, and other implementation details. BP’s report reminds us that in a sense, none of that matters. There isn’t a tremendous amount of execution needed for the company to keep growing: if all goes well, the electric car pioneer and many of its peers should be able to ride the secular trend of renewable energy to new heights.
If you see a company that’s helping Earth transition to renewable energy and the business model makes sense, you should invest. This clean energy thing is going to be much bigger than people imagine.
Take a look around you, at all the polluting vehicles in the world: from cars, to boats, to planes, to your home. All of that needs to be powered by entirely new clean technology –– and that transition will shake up the world economy as we know it.