BP has pushed back its forecast for peak oil demand to 2030 from its previous assumption that consumption would effectively peak this year while bolstering its broader outlook for fossil fuels to 2050.

In a webinar on Thursday to promote the company’s latest Energy Outlook, BP Chief Economist Spencer Dale said that fossil fuels were big beneficiaries of “disappointing” progress in the energy transition and lagging energy efficiency gains over recent years, evidence of which can be seen by continuing growth in greenhouse gas emissions “at significant levels.”

Under BP’s Current Trajectory (CT) scenario, global oil demand is expected to rise from 102.2 million barrels per day this year to 103.4 million b/d in 2030 before edging lower to 100.7 million b/d in 2035.

Demand is then expected to drop to 95.5 million b/d in 2040 before falling more sharply in the following decade, coming in at 83 million b/d in 2050 — down about 19% from current levels.

In last year’s version of its CT scenario, BP assumed global oil consumption would peak around 2025 and then fall to 75 million b/d in 2050, down 27% from 102 million b/d in 2023.

Gareth Ramsey, BP’s head of energy transition and systems analysis, said the firm’s new corporate strategy, which prioritizes greater investment in its core oil and gas operations over its low-carbon businesses, reflected its stronger outlook for oil and gas.

BP said the upgrades to its oil demand projections partly reflect data showing that oil consumption has been stronger in recent years than it previously assumed.

Ramsey also said the company’s fuel efficiency expectations for the global fleet of internal combustion engine (ICE) vehicles had been revised lower for the next 25 years. He attributed this to consumers holding onto their vehicles for longer than in previous eras, with ICE vehicles now turning over every 15 years on average rather than every 12 years in earlier estimates.

He added that previous iterations of BP’s outlook likely underestimated the future role of oil as a feedstock for the petrochemicals industry, particularly in the manufacture of plastics.

BP’s CT scenario, which is built around climate policies already in force and pledges for future decarbonization, assumes emissions will fall by about 25%, resembling the International Energy Agency’s (IEA) Stated Policies projections.

While BP provides a firmer outlook for global oil demand in this year’s CT compared to its 2024 edition, it remains less bullish than Exxon Mobil’s long-term view, which reckons demand will ultimately plateau but remain at around 105 million b/d in 2050. BP’s outlook is also considerably more bearish than Opec’s reference case, which sees demand continuing to expand and reaching 123 million b/d in 2050.

BP’s CT scenario also sees natural gas demand growing to around 4.8 trillion cubic meters by 2040 before plateauing, up some 17% from current levels, boosted by China, India and other Asian and Middle Eastern countries.

Ending Net Zero

BP retired its Net Zero scenario this year, and instead introduced a Below 2° (B2) scenario, which assumes a significant tightening in climate policies alongside shifts in societal behavior and preferences that result in more rapid adoption of low-carbon energy and faster gains in energy efficiency.

The company’s B2 scenario sees global oil demand peaking this year and starting to fall sharply next decade, with estimated consumption at just 33.8 million b/d in 2050, as emissions fall by 90% over the next 25 years. Last year’s Net Zero scenario had 2050 oil demand at 29 million b/d.

While oil demand from road transportation is under pressure in both of BP’s scenarios, the demand for oil for petrochemical feedstock, particularly in plastics manufacturing, is expected to provide the most long-term support.

Feedstock for petrochemicals under the CT scenario increases from 14.2 million b/d in 2025 to 20.2 million b/d in 2035 and 22.9 million b/d in 2050. However, Ramsey said mid-century demand from the sector could be as much as 10 million b/d higher if the historical relationship between economic growth and plastics use is restored. Recently, that relationship has weakened, he said.

Uncertain Transition

Dale said the energy transition remains the ultimate wild card in BP’s forecasts. The world remains in “energy addition” mode rather than “energy substitution” mode, and the pathway to the latter is unclear, underpinning the company’s enhanced outlook for fossil fuels.

While continued growth in fossil fuels has surprised and increased emissions significantly, Dale said spending on low-carbon energy has likewise surprised to the upside, citing IEA estimates that such outlays will reach $2.2 trillion in 2025 — up 70% over the past five years.

Weakening energy efficiency gains over the last five years help explain the situation, although BP acknowledged that the causes of the weakening remain “poorly understood.”

The company calculates the pace of improvement in energy efficiency — measured as the amount of total final energy consumed per unit of GDP — averaged just 1.5% annually in 2019-24, down from almost 2% per year over the prior 10 years.

Dale also said he worries about “geopolitical fragmentation” that could result in “greater energy differentiation” in markets as the transition continues to unfold.

The Ukraine war, conflicts in the Middle East and growing trade tensions have undermined globalization. Dale worries that big fossil fuel exporters will feel less pressure to decarbonize. The US, for example, may be less inclined to move away from fossil fuels because of its bountiful reserves. Its economy is less trade-intensive as well, and it could be wary of importing low-carbon technology from manufacturing leaders and geopolitical rivals like China.

China, on the other hand, is more dependent on trade and has built up its low-carbon market to the extent that it is now the dominant exporter of those technologies and materials. China accounts for 60% electric vehicle purchases, 65% of new wind and solar installations, and 30% of new nuclear installations, according to BP.

Trade standoffs between countries on opposite sides of the energy spectrums could result in a slower or fragmented transition, Dale suggested.