Global energy demand is set to rise by 2035, but oil prices are likely to remain low while production increases faster than demand.
In the next 20 years, energy demand will increase around 30 per cent across the globe, although it will be offset by rapid gains in energy efficiency, according to an analysis of long-term energy trends.
BP's annual Energy Outlook found oil, gas and coal will remain the main sources of energy in 20 years, accounting for 75 per cent of total energy supply in 2035 compared with 86 per cent in 2015.
Oil demand will grow slower than production
Demand for oil is set to grow at a slowing pace to 2035 – by that year cumulative oil demand is set to be around 0.7 trillion barrels, which is significantly less than the recoverable oil in the Middle East alone.
The Organisation of the Petroleum Exporting Countries (Opec), Russia and the US oil production is set to increase from 56 per cent today to 63 per cent in 2035.
The abundance of oil could set the stage for a long-term struggle between low-cost producers such as US shale companies, Opec members in the Middle East as well as Russia and more expensive offshore production in areas such as Brazil, the North Sea and Asia, BP chief economist Spencer Dale said.
"Low-cost producers will use their competitive advantage to increase their share relative to higher-cost producers," Dale told reporters.
Gas will overtake coal by 2035
Global consumption of coal is expected to peak in the mid-2020s, while demand for gas is set to grow an average 1.6 per cent per year to 2035. Gas will overtake coal as the second most used fuel source, mostly due to increases in shale gas production in the US and energy policies that favour gas over coal.
Renewables will continue to grow the quickest
By far, the fastest-growing energy source will be renewables, which are set to quadruple over the next 20 years.
Carbon emissions will grow at less than a third of the rate of the past 20 years, reflecting both gains in energy efficiency and the changing fuel mix, BP said. But they are still projected to increase, highlighting the need for further action.
“The energy mix is shifting, driven by technological improvements and environmental concerns. More than ever, our industry needs to adapt to meet those changing energy needs,” said Bob Dudley, BP group chief executive.
Transport won't be the top oil consumer anymore
Demand for oil is also seen shifting from the transport sector, which today consumes most of the world's oil, to non-combustible uses, particularly in petrochemicals, by 2035.
“The possibility that the most important source of growth in oil demand in the 2030s won’t be to power cars or trucks or planes, but rather used as an input into other products, such as plastics and fabrics, is quite a change from the past,” Dale said..
BP predicts the number of electric cars will increase from 1.2m in 2015 to around 100m in 2035 to make up around 5 per cent of the global car fleet.
“The impact of electric cars, together with other aspects of the mobility revolution, such as self-driving cars, car sharing and ride pooling, is one of the key uncertainties surrounding the long-term outlook for oil” Dale said.