Peak oil is closer than you think: BP

UK oil giant BP has become the first major to warn that global demand for crude oil may peak within the next few years, signalling an early end to an era that many still argue is far from over.

BP's annual energy outlook shows oil consumption is unlikely to ever return to levels seen before the coronavirus smashed demand, with all three scenarios modelled showing oil demand falling over the next 30 years as the clean energy transition washes through the global economy.

BP's outlook puts it at odds with the  executive director of the International Energy Agency, Fatih Birol, and many other oil and gas majors which say that peak oil demand is still years away.

Even BP's most bullish oil scenario sees demand no better than “broadly" flat for the next two decades as the world shifts away from crude oil and refined products to renewable energy and gas.

That scenario is the “business as usual” case, which assumes government policies, technologies and social preferences evolve in a manner and speed consistent with the recent past. The model shows oil demand rebounds from the COVID-19 fallout but then flat lines further ahead in the 2020s.

The outlook for gas consumption in this scenario is far more bullish, showing demand increasing throughout the next 30 years to be about a third higher by 2050.

Two other scenarios model aggressive policies to tackle climate change. They indicate oil demand never fully recovers, implying 2019 levels of 100 million barrels a day will remain the peak for consumption.

The rapid scenario assumes the introduction of policy measures, led by a significant increase in carbon prices, that result in carbon emissions from energy use falling by around 70 per cent from 2018 levels by 2050. The net zero scenario assumes carbon emissions drop by more than 95 per cent.

For gas, consumption peaks in mid-2030 under the rapid scenario and in the mid-2020s in the net zero model.

Both the rapid and net zero scenarios assume a significant increase in carbon prices, reaching $US250 a tonne of CO2 in the developed world by 2050 and $US175 a tonne in emerging economies.

This is much lower in the business as scenario, with carbon prices reaching only $65 and $US35 a tonne CO² by 2050 on average in developed and emerging economies respectively.

Bernard Looney, who became chief executive in February, said the outlook was "instrumental in helping us develop our new strategy [to reach net zero emissions by 2050]."

London-based BP announced plans in June after it slashed as much as $US17.5 billion ($25 billion) off the value of the UK energy major's assets and in the pandemic induced oil wreck.

The new strategy includes slashing oil and gas production by about 40 per cent and increasing spending on low-carbon technology tenfold to $US5 billion a year over the next decade.

"The world remains on an unsustainable path," Mr Looney said. "The outlook shows that, with decisive policy measures and more low carbon choices from both companies and consumers, the energy transition still can be delivered."