BP Pushes Oil Demand Peak to Mid-2030s – Irina Slav

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The company now sees global oil demand peaking in the mid-2030s instead of before 2030.
BP: declines are coming only gradually, driven by efficiency gains and EV adoption but offset by petrochemicals.
Under BP’s “Current Trajectory,” demand drops 15% by 2050, while in a “Below 2°C” scenario it plunges 70%, with EVs rising to 1.4–2.1 billion globally by then.

A year ago, BP predicted that oil demand growth could peak before 2030. In that, the company was in tune with the IEA and a host of other forecasters. This year, BP has changed its prediction. Now, the supermajor expects demand growth to continue until the mid-2030s—and then start declining slowly.

In the latest edition of its Energy Outlook, BP wrote that “Oil demand declines over the outlook but continues to play a significant role in the global energy system over at least the next 10-15 years”. The decline, according to the forecasters, would be the result of further gains in energy efficiency and the growth in electric vehicle sales. However, these trends of efficiency plus electrification would be offset by growth in oil demand from the petrochemicals sector.

There is, however, a catch. Energy efficiency gains have been slowing in recent years, and this would affect the future trajectory of oil demand, BP said. The slowdown in the rate of efficiency gains began five years ago, and unless it reverses, BP sees the annual rate of efficiency improvement at 2%, which would result in additional oil demand of some 6 million barrels daily over the next decade.

Given that every technology has limits to what it could gain in terms of efficiency, chances are that it would be rather difficult to reverse the slowdown in the rate of efficiency improvements over the last five years. Mostly, these gains relate to power generation and the likelihood of wind and solar replacing gas and coal as the dominant source of electricity, but they also concern fuel efficiency in vehicles, where oil dominates.

In an unsurprising finding, BP noted in its report that the growth in demand for both oil and gas would continue to be driven by emerging economies. China has accounted for half of global oil demand growth for years, but now, its demand growth rate is slowing down, and other Asian economies are coming to the fore as drivers. India is the most obvious and largest example, but according to BP, the rest of Asia will also play a role in shaping the demand curve by 2050.

The company looks at two scenarios in its forecast. One is dubbed Current Trajectory and essentially refers to the already existing trends and policies. The other scenario, Below 2 C, refers to a more active decarbonization push on the part of both the political and the corporate world. Under the Current Trajectory scenario, oil demand sheds 15% from 2023 levels by 2050. In the Below 2 C scenario, oil demand declines by as much as 70%.

In the Current Trajectory scenario, demand for crude peaks around 2035 and plateaus until 2050 in most of the world, a decline visible only in China and the developed world, according to BP. In its Below 2 C scenario, decline is both faster—after 2035—and sharper. While in the Current Trajectory scenario, demand for oil in 2050 is estimated at some 85 million barrels daily, in the Below 2 C scenario, this drops to less than 35 million barrels daily.

In both scenarios, oil demand is projected to be supported by increased air travel as global economic activity expands and developing economies continue to improve the living standards of their populations. Industrial use of crude oil, on the other hand, is expected to decline in the years until 2050.

So will demand for oil from the transport sector, thanks to deliberate policies aimed at discouraging sales of internal combustion engine vehicles. BP projects that the number of EVs and trucks will rise from 40 million globally in 2023 to 480 million in 2035—and that’s under the Current trajectory scenario. Under the Below 2 C scenario, EV numbers hit 560 million in 2035. By 2050, EVs reach 1.4 billion under Current Trajectory and 2.1 billion under Below 2 C. For context, as of 2024, the total number of cars in the world was estimated at some 1.475 billion.

Countering this loss of demand from the transport sector, oil demand from the petrochemicals industry is increasing. This is perhaps the least surprising projection in BP’s forecast. For years, multiple forecasters have said that petrochemicals will become the biggest driver of global oil demand, replacing cars and trucks. Indeed, as BP reports in its outlook, demand for oil as petrochemical feedstock has grown from 8 million bpd in 2000 to over 14 million bpd in 2023. This represents a quarter of overall oil demand growth in the period.

Yet demand growth in petrochemicals is also about to start slowing down in a decade, amid weakening global economic growth, which would directly affect demand for plastics, which is where most of the oil is used, according to BP.

Neither of the scenarios bodes well for the oil industry, of which BP itself is a big part. However, as the company notes early on in its outlook, “The likelihood that either of the two scenarios used in this year’s Energy Outlook will materialize exactly as described is negligible.”

By Irina Slav for Oilprice.com