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Uncertain energy future
BP's annual Energy Outlook asseses possible impacts of increasing energy demand
Alan Bailey for Petroleum News
The 2025 edition of BP's annual Energy Outlook, published in September, evaluates the possible impacts of increasing global energy demand on the various technologies for energy supplies, including the use of fossil fuels and the use of renewable energy technologies.
The report says that energy demand continues to grow at an annual rate of about 1%, with all of that increase coming from emerging economies as a consequence of improved prosperity and economic growth.
At the same time improvements in energy efficiency have tended to slow in recent years. The consequence of all of this is a continuing increase in global carbon emissions.
Along with these trends, heightened global geopolitical tensions have caused many countries to pay increased attention to energy supply security, the report says. Strategies for addressing energy security vary, depending on whether countries import their energy supplies or whether, for example, they can use domestic fossil fuel production.
Growth in oil demand The report says that growth in oil demand since 2019 has averaged 0.6 million barrels per year, entirely as a consequence of increasing demand in emerging economies. The report suggests that oil demand is likely to plateau in the second half of the 2020s. Also, the relative use of oil is shifting from its consumption as a fuel for road transportation to a feedstock in the petrochemical industry, the report says.
China, and to a lesser extent the Middle East and the United States, have driven a growth in the demand for liquefied natural gas, while the loss of Russian pipeline gas exports to Europe has also heightened the importance of the LNG market.
Investment in clean energies Alongside all of this, investment in clean energies has grown rapidly in recent years, led by investment in wind and solar power.
The use of wind and solar power doubled between 2019 and 2024, driven in particular by solar power, with China accounting for more than half of this increase, the report says. The use of other less mature, higher cost clean energy technologies such as low-carbon hydrogen, sustainable aviation fuels and carbon capture and storage remain at an early stage of development and depend on policy and regulatory support.
Sales of electric vehicles have increased rapidly, particularly in China. In the European Union and the United States growth in the use of electric vehicles has been dependent on vehicle emissions regulations, the report says.
At the same time there are growing concerns about the availability and security of supplies for the critical minerals used in state-of-the-art technologies.
So, what may all of this mean in terms of the world's energy future?
Two scenarios The Energy Outlook uses two theoretical energy scenarios to assess future possibilities. A current trajectory scenario assumes that the energy future will continue along its current path, based on current climate and energy policies. Alternatively, a below 2 degrees celsius scenario assumes significant tightening of climate policies and shifts in societal behavior that lead to a more rapid adoption of low carbon energy sources and faster improvements in energy efficiency.
The report does not suggest that either of these scenarios represent what will actually happen. Rather, they can help develop some insights into how the energy system may evolve in the next 25 years.
In particular, features that are common to both scenarios may be more likely to characterize what will actually take place.
The lower emissions in the below 2 degrees scenario would be driven by heightened decarbonization in emerging economies, and in the power and industrial sectors. In particular decarbonization of electrical power generation accounts for about 40% of the difference in emissions between the two scenarios, the report says. Increased energy efficiency, the greater use of electrification, the increased use of low carbon hydrogen and the use of carbon capture and storage in industry account for about 35% of the difference, the report says. A reduced demand for manufactured goods and materials could also have an impact.
At the same time, a growth in global energy use is driven by a combination of improved prosperity and rising populations in emerging economies. On the other hand, global economic growth has slowed somewhat in recent years, mainly as a consequence of slowing population growth. Nevertheless, the report anticipates the world economy roughly doubling in size between 2023 and 2050, with that growth particularly taking place in emerging economies.
Energy demand in emerging economies The current trajectory scenario sees primary energy demand in emerging economies rising by almost a half by 2050, while the below 2 degrees scenario sees demand in emerging countries falling during the second half of the outlook. On the other hand, growth in energy demand in developed economies and in China is anticipated to be much weaker in both scenarios.
And both scenarios envisage renewable energy technologies constituting the fastest growing sources of primary energy, accompanied by a decline in the share of primary energy provided by fossil fuels. The biggest decline is likely to be in the use of coal for power generation.
The current trajectory scenario envisages only a slight drop in the use of oil as a percentage of prime energy sources by 2035. However, use of renewable energy would increase from around 10% to more than 15% of primary energy, supported by the growing electrification of the energy system and the increased penetration of wind and solar power. By 2050 renewables and natural gas would each provide about a quarter of the world's primary energy.
As distinct from primary energy, the sources of the energy that the world uses, energy consumption, the amount of energy actually used, is anticipated to increase by about 15% in the first half of the current trajectory scenario and to plateau thereafter. By comparison, in the below 2 degrees scenario accelerating improvements in energy efficiency would result in a 10% fall in energy consumption in developed countries by 2035, with further fall in later years. Key factors in reducing energy consumption would be the electrification of the energy system and the improved efficiency of electric-based technologies.
Low carbon energy production The report also comments that, while in some parts of the world low carbon energy production is already increasing faster than total energy demand, at a global level low carbon energy production is not increasing fast enough to meet the entire growth in energy demand.
However, the acceleration in the electricification of the energy system and the rapid deployment of renewables will result in more countries moving into low carbon energy substitution, the report suggests. Currently China is electrifying its energy system more quickly than the U.S., Europe and India, although the rate of electrification in Europe may pick up more rapidly in a few years time, the report comments.
Demand for low carbon hydrogen is also likely to increase for use in heavy, long haul road transportation and for producing alternative fuels such as methanol and ammonia.
The report also envisages an increase in the use of nuclear power generation in the coming years, to enhance energy security and support climate goals.
The report also comments that growing power demand from data centers associated with the use of artificial intelligence may have an increasing impact on both energy supplies and economy-wide energy demand. Artificial intelligence may also have a significant impact on the efficiency with which energy can be produced, the report suggests.
Longterm decline in oil demand Both scenarios envisage a long-term decline in oil demand.
In the current trajectory scenario oil demand continues to grow over the remainder of the current decade before moving into steady decline. Near-term demand would be supported by increased use in India and other emerging Asian countries with rapidly growing economies.
Beyond 2035 global demand would fall, primarily because of a drop in demand in developed countries and China. In the below 2 degrees scenario the drop in demand would be much faster and would begin earlier.
In parallel with the drop in oil demand, oil production would likely shift more towards countries in the Organization of the Petroleum Exporting Countries, and away from onshore the United States, the report suggests.
The two issues that are particularly important in assessing future oil demand are the diminishing role of oil in the production of fuel for road transportation and the persistent use of oil as a feedstock in the petrochemical industry, the report suggests. There is also an increasing use of jet fuel for air travel as a consequence of increasing global economic activity and the growing prosperity of developing economies.
In terms of road transportation, increasing demand is more than offset by improved vehicle efficiency and the switch to electric vehicles, the report says.
Natural gas demand Demand for natural gas, on the other hand, would be shaped by the opposing forces of increased demand in emerging economies and a shift away from natural gas as the world electrifies.
The report suggests that gas demand would level out in the current trajectory scenario but fall after plateauing in the below 2 degrees scenario.
The characteristics of the LNG trade after 2030 would depend on the pace of the energy transition and would be boosted by demand in emerging Asian economies.
The current trajectory scenario envisages LNG exporting increasing by more than 60% by 2035 and then continuing to grow at a slower pace. The below 2 degrees scenario sees LNG exporting declining in the 2030s.
The Energy Outlook envisages U.S. natural gas production increasing in the coming years, in part because of increasing power generation demand and in part because of the growth in LNG exporting.
Three key issues Underling all of this, the report sees three key issues that impact the transition to cleaner energy: increased geopolitical fragmentation, a sustained weakness in energy efficiency, and the delayed and disorderly nature of the transition to low carbon energy.
But delaying the transition could lead to an eventual costly and disorderly situation, to deal with the growing impacts of climate change, the report suggests.
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