LONDON -- Great change is in store for energy in the next two decades as new demand-eroding forces such as electric vehicles (EV) and fuel-efficiency improvements push back against a rising middle class in developing countries across the globe.
That’s the consensus of BP’s 2017 Energy Outlook, which provides the major oil’s projections on everything energy, from oil to EVs.
“The main story in this year's Energy Outlook is about the energy transition that is taking place and is likely to continue to take place over the next 20 years,” said Spencer Dale, group chief economist for London-based BP. “On the demand side, there's a shift in the pattern of demand, away from the U.S. and Europe to fast-growing Asian markets. On the supply side, the story is one of a continuing shift in the fuel mix toward lower-carbon fuels.”
Read on for five areas of change to expect in the next 20 years.
BP expects rising incomes and improving road infrastructure will help the global vehicle fleet to double from 0.9 billion in 2015 to 1.8 billion cars by 2035.
The fleet for non-OECD (Organisation for Economic Co-operation and Development) countries, which includes China and India, will triple to 1.2 billion vehicles within this same time span.
As the vehicle fleet grows, BP expects the number of electric vehicles (EV) to also increase greatly, from 1.2 million globally in 2015 to about 100 million by 2035. At this point, EVs would make up 5.5% of the global fleet.
Three-quarters of these will be battery-electric vehicles (BEVs), running on pure electricity, and a quarter will be plug-in hybrids.
How quickly EVs can grow share will depend on a few factors, according to BP:
- How much fuel economy standards are increased.
- How quickly battery costs decline.
- The size of government subsidies supporting EV growth, and their durability.
- How quickly conventional vehicle fuel efficiency grows.
- Consumers’ attitudes toward EVs.
Even as vehicle fuel efficiency and EV ownership continues to rise, BP expects that global fuel demand will as well thanks to a growing middle class in emerging economies.
Vehicles made up one-fifth, or 19 million barrels per day (bpd), of global liquid fuel demand, in 2015. BP projects a doubling in demand for car travel over the next two decades. Assuming no other factors, this would double cars’ liquid fuel demand within that same time period.
Improving fuel efficiency would affect potential growth by 16 million bpd, BP analysts say, with the average passenger vehicle’s fuel economy expected to rise from 28 to 47 miles per gallon from 2015 to 2035.
EV growth will also take a bite out of oil demand growth, but a smaller one. An increase of 100 million EVs would set oil demand growth back by 1.2 million bpd, or less than one-tenth the effect of efficiency gains.
However, BP still expects a 4-million-bpd increase in global liquid fuel demand from 2015 to 2035, thanks to an appetite for fuel from a growing middle class in emerging economies pushing harder against headwinds from fuel-efficiency improvements and EVs.
BP expects oil consumption in North America to drop by 4 million bpd to reach 19 million bpd by 2035, which would be the lowest point since 1985. Oil’s share of the energy market, meanwhile, would fall from 36% to 29% by 2035.
Consumption of renewable energy, such as biofuels, will grow 5.6% from 2015 to 2035, increasing its share of fuel from 4% to 12%.
Thanks to a mix of slow demand growth (4% by 2035) and strong production growth (21% by 2035), BP expects North America to become energy self-sufficient by 2035.