Thursday, February 26, 2015
Despite the dramatic recent weakening in global energy markets, ongoing economic expansion in Asia—particularly in China and India—will drive continued growth in the world’s demand for energy over the next 20 years. According to the new edition of BP Energy Outlook 2035, global demand for energy is expected to rise by 37% from 2013 to 2035, or by an average of 1.4% a year. The Outlook looks at long-term energy trends and develops projections for world energy markets over the next two decades. The new edition was launched Feb. 17 in London by Spencer Dale, BP’s group chief economist, and Bob Dudley, group chief executive.
“After three years of high and deceptively steady oil prices, the fall of recent months is a stark reminder that the norm in energy markets is one of continuous change,” said Dale. “It is important that we look through short term volatility to identify those longer term trends in supply and demand that are likely to shape the energy sector over the next 20 years and so help inform the strategic choices facing the industry and policymakers alike.”
The Outlook projects that demand for oil will increase by around 0.8% each year to 2035. The rising demand comes entirely from non-Organization for Economic Cooperation and Development (OECD) countries. Oil consumption within the OECD peaked in 2005 and by 2035 is expected to fall to levels not seen since 1986. By 2035, China is likely to have overtaken the U.S. as the largest single consumer of oil globally.
The current weakness in the oil market, which stems in large part from strong growth in tight oil production in the U.S., is likely to take several years to work through. In 2014, tight oil production drove U.S. oil output higher by 1.5 MMbbl—the largest single-year rise in U.S. history. But further out, the growth in tight oil is likely to slow and Middle East production will gain ground once more. By the 2030s, the U.S. is likely to have become self-sufficient in oil, after having imported 60% of its total demand as recently as 2005, BP observes.
Demand for natural gas will grow fastest of the fossil fuels over the period to 2035, increasing by 1.9% a year, led by demand from Asia. Half the increased demand will be met by rising conventional gas production, primarily from Russia and the Middle East, and about half from shale gas. By 2035, North America, which currently accounts for nearly all global shale supply, will still produce around three-quarters of the total. Energy self-sufficiency in North America, which is expected to become a net exporter of energy this year, and increasing LNG trade are also expected to have fundamental impacts on global energy flows over time. Increased oil and gas supplies in the U.S. and lower demand in the U.S. and Europe due to improving energy efficiency and lower growth will combine with continuing strong economic growth in Asia to shift the energy flows increasingly from west to east.
“After three years of high and deceptively steady oil prices, the fall of recent months is a stark reminder that the norm in energy markets is one of continuous change,” said Dale. “It is important that we look through short term volatility to identify those longer term trends in supply and demand that are likely to shape the energy sector over the next 20 years and so help inform the strategic choices facing the industry and policymakers alike.”
The Outlook projects that demand for oil will increase by around 0.8% each year to 2035. The rising demand comes entirely from non-Organization for Economic Cooperation and Development (OECD) countries. Oil consumption within the OECD peaked in 2005 and by 2035 is expected to fall to levels not seen since 1986. By 2035, China is likely to have overtaken the U.S. as the largest single consumer of oil globally.
The current weakness in the oil market, which stems in large part from strong growth in tight oil production in the U.S., is likely to take several years to work through. In 2014, tight oil production drove U.S. oil output higher by 1.5 MMbbl—the largest single-year rise in U.S. history. But further out, the growth in tight oil is likely to slow and Middle East production will gain ground once more. By the 2030s, the U.S. is likely to have become self-sufficient in oil, after having imported 60% of its total demand as recently as 2005, BP observes.
Demand for natural gas will grow fastest of the fossil fuels over the period to 2035, increasing by 1.9% a year, led by demand from Asia. Half the increased demand will be met by rising conventional gas production, primarily from Russia and the Middle East, and about half from shale gas. By 2035, North America, which currently accounts for nearly all global shale supply, will still produce around three-quarters of the total. Energy self-sufficiency in North America, which is expected to become a net exporter of energy this year, and increasing LNG trade are also expected to have fundamental impacts on global energy flows over time. Increased oil and gas supplies in the U.S. and lower demand in the U.S. and Europe due to improving energy efficiency and lower growth will combine with continuing strong economic growth in Asia to shift the energy flows increasingly from west to east.
