Why is BP announcing the decline of oil?

  •   17/09/2020 - 13h41
  •   HARMANT Adeline

The BP group, like other oil majors, seems quite pessimistic about the long-term future of oil prices. Indeed, this company justifies its strategy with a forward-looking scenario that has enough to worry investors with a peak in demand between 2020 and 2030 and a drastic decline thereafter, which pushes the group to try to become a multi-energy major.

--- Advertisement ---
Trade Oil online
76.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Why is BP announcing the decline of oil?
Image copyright: ben klocek - Flickr

Up to -50% for oil in the long term:

According to the BP Group and if the world stays on a global warming trajectory of 1.5°, oil demand could lose 80% of its value by 2050. In the best case scenario, the fall will be at least 10%.

These conclusions are also supported by its competitor Shell, which, like BP, publishes annual meetings that are very well attended by observers of the energy sector. BP announces there that, independently of the energy policies of the States, the demand for oil has today almost reached its peak. It is therefore expected to decline between 2025 and 2030. Over the next 30 years, the price of oil is thus expected to lose at least 10% and up to 80% if climate data does not improve.


Other energies studied to come to this conclusion:

Of course, the world's energy demand and needs will continue to grow and, even if it finally stabilizes, it will have reached 25% by 2050 with a high carbon price. Oil and coal are therefore the two energies that will be the most impacted by this scenario and the latter evokes a share of hydrocarbons in primary energy between 65 and 20% in 2050 against 85% in 2018 while the share of renewable energies will reach 20 to 60%.

In transport in particular, the use of oil is expected to drop from 90% in 2018 to 20% at the lowest estimate for 2050. Non-energy oil demand is expected to remain stable or increase slightly.

Natural gas, on the other hand, is expected to be somewhat more resilient over this period with a peak around 2030 and an increase of one third by 2050. It may indeed limit the use of coal in rapidly developing economies.

Finally, the share of electricity is expected to increase everywhere in the energy mix. According to this scenario, the share of electricity in final consumption would rise from almost 20% in 2018 to 34% in BAU, 45% in Rapid and 50% in Net Zero in 2050.

With these forecasts and the increase in the share of electricity compared to oil, the oil groups BP, but also Shell and Total, wish to maintain their leadership position. This is why they are now investing more in renewable energies and carbon capture and storage. Moreover, they now present themselves as energy suppliers and no longer as oil companies.