Understanding Future Energy Demand
2040: that is only 22 years from now (remember 1996?). BP is once again looking into the crystal ball, all the way up to 2040, with the results presented in their most recent Energy Outlook (2018 edition)*.
A prerequisite to understanding future energy demand is GDP (Gross Domestic Product) forecasts as a function of population growth. According to BP, world GDP will more than double during the next two decades, broadly in line with growth seen over the past 25 years. And, as the global population reaches 9.2 billion, more than 2.5 billion (500 times Norway’s population!) will be lifted from low incomes.
Forecasting Future Energy Demands
BP therefore concludes that global energy demand will increase by about 35% as global prosperity increases. China and India will account for half of this demand. That figure is not controversial.
Forecasting the future energy mix is, however, always controversial. BP’s view is that oil, gas, coal and non-fossil fuels (hydro, nuclear, renewables) will each contribute around 25% in 2040. Renewables will constitute 14% in 2020, with an annual growth of 7%. This makes up 40% of the increase in energy supplies. Remember, with an annual growth of 7%, it takes ten years to double the production. Consequently, the world needs a much stronger growth in renewables if these sources are to replace fossil energy before 2040.
For the oil industry, it is comforting to read that BP believes that demand for oil will grow by 0.5% p.a. during the 2020s. However, demand is projected to plateau in the 2030s. Moreover, demand for natural gas will grow strongly at 1.6% p.a. and during the next 20 years it will overtake coal as the second largest source of energy.
“The date at which oil demand will stop growing is highly uncertain and small changes in assumptions can lead to vastly different estimates". BP Energy Outlook 2018
The world is likely to demand large quantities of oil for many decades to come, BP concludes.
Found this article interesting? Check out the full BP Energy Outlook 2018 for the full story.