After cautioning the AGM that ‘all forecasts are wrong’ BP Group Chief Economist Spencer Dale explained the background to the company’s Statistical Review of World Energy and Global Outlook. Rather than predicting the future, he said, forecasts should be used to better understand current uncertainties and plan a range of actions in line with those uncertainties. Forecasts are also a way of avoiding ‘group think’, he added.
His presentation focused on the 30% rise in energy demand predicted within the next 20 years, largely attributed to growth in Asian prosperity.
Concerns over climate change notwithstanding, oil and gas will play vital roles in maintaining security of supply for a growing world population. Particularly important will be the role of gas in power generation, while the role of coal diminishes.
News on carbon is mixed, Spencer said. While increases in carbon emissions should be about one third of the growth in carbon releases in the past 20 years (due to efficiency improvements and shifts in the fuel mix away from coal to gas and renewables), growth in carbon emissions is still likely to continue.
And while demand for oil is expected to rise, the dominant source of growth will shift from transport to non-burning uses such as petrochemicals, feedstocks and lubricants by the end of the outlook period.
Supply is not a constraint on the growth in oil demand, with abundant resources available – some 2.5 trillion barrels of oil technically recoverable, he said.
On the subject of electric cars, he noted that there are currently two million on the road today – out of one billion cars in total. Although this will rise to 100 million electric cars in BP’s central projection, they will still only account for 4-5% of cars on the road; reducing oil demand by no more than 1%. Even if electric car growth occurs at double the projected rate, this will not be a ‘game-changer for oil demand’ within BP’s 20-year forecast window. Greater impact from the ‘mobility revolution’ will come from autonomous vehicles as well as more car-sharing and car-pooling, he said.
Natural gas will be the fastest growing fossil fuel over the next 20 years, much driven by US shale gas production. As part of that growth, LNG will become increasingly important because it is relatively easy to transport to meet global market demands. This opens opportunities for arbitrage, he said.
In response to questions, Spencer focused on the expanding electrification of the world and the opportunities this offers for gas and how ‘the oil and gas industry must strive to be – and be seen to be – a part of the carbon solution.’