Oil era ending: Good for climate, if BP’s reading of future demand is correct

Against such a backdrop, BP’s belief that peak oil demand has been reached and there will either be a decline or no increase hereon should come as a relief.Against such a backdrop, BP’s belief that peak oil demand has been reached and there will either be a decline or no increase hereon should come as a relief.

Oil supermajor BP predicts a high likelihood of oil demand growth weakening sharply, hastened by the crash caused by the pandemic. As per a report in Bloomberg, BP’s most optimistic scenario for oil will see demand stay “broadly flat” over the next two decades, with social preference and government policy catalysing a shift away from fossil fuels. It is difficult to say whether BP’s predictions will materialise; oil-exporting nations, energy corporates, etc, continue to insist the opposite, that oil consumption still has a few decades of growth before it starts fading. The fact that the oil supermajor has been pivoting away from oil, towards renewables—CEO Bernard Looney, as per Bloomberg, has announced that the company will shrink oil & gas output by over 40% over the next decade and will be spending as much as $5 billion a year to build a renewables supermajor—could also colour the perspective on BP’s latest call. However, the fact that at least two other oil giants, Total SE and Royal Dutch Shell, are also betting big on clean energy, should lend weight to BP’s predictions.

In the US, one of the world’s largest consumers of fossil fuels and one of its largest polluters (absolute and per capita), fossil fuels account for 75% of the anthropogenic greenhouse gas emission. As per an analysis by the country’s environment regulator, CO2 emissions have nearly doubled since the 1970s, with nearly four-fifths of this increased emission attributable to fossil fuels. Given the US, under Donald Trump, has turned its back on climate action, the threat of emissions growing remained until the pandemic broke out. Add to this China’s massive fossil fuel consumption and its large investments over the last decade in fossil fuels, not just at home but also abroad, all indications—till the start of this year—was that fossil fuel consumption would only trend upwards. Against such a backdrop, BP’s belief that peak oil demand has been reached and there will either be a decline or no increase hereon should come as a relief. Premier environment agencies have already warned that the window to act on keeping the world on a “2oC-rise above pre-industrial levels” pathway could be closing fast or has already shut. Scientific modelling and research reports that make clear what disaster awaits the planet if there is no meaningful climate action/change-adaptation are too numerous to recall. BP’s projection is perhaps a barometer of how attitudes are changing, both among consumers and in policy circles.

This newspaper has argued that unless there is concerted action—the US, Australia, Brazil, China have all either overtly or covertly failed this—individual-nation efforts (like India’s) won’t count for much. So, if a policy is being persuaded enough on climate action, by experts and the electorate alike, that oil major sees the world moving away significantly from fossil fuels over the next couple of decades, it could be an indication that some manner of consensus is there. That said, oil-companies committing to a greener business plan over the next few decades need to make this explicit in every manner possible—it can’t be that companies announce green goal on the one hand, and remain on the other hand, as Bloomberg columnist Kate Mackenzie pointed out last month, funders and active members industry associations and lobby groups that still push governments on policies favouring fossil fuels.

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