BP: The war in Ukraine will speed up the transition to renewables
By Anders Lorenzen
The oil and gas major, BP (British Petroleum) is one of the world’s oil and gas giants. BP has in the past downplayed the role of renewables, but the company has recently been more ambitious in efforts to accelerate the shift away from hydrocarbons and that trend continues in its annual energy outlook.
In its recent 2023 Energy Outlook, the company predicts that the war in Ukraine is accelerating the shift to renewables and low-carbon power. The energy giant said that the war would slow global economic activity by around 3% by 2035, due to higher food and energy prices and a reduction in trade activity. In addition,
BP lowered its oil and gas demand forecast in 2035 by 5% and 6% respectively, based on the current energy transition plans by governments. Those changes are primarily focused on Europe and Asia as they rely heavily on energy imports.
The Outlook considers three scenarios in which global energy demand peaks between the late 2020s and 2035. Under the leadership of Chief Executive Bernard Looney, BP aims to rapidly grow the company’s renewables business and slash oil and gas output by 2030.
The war in Ukraine is altering the global energy trade
The Outlook’s position on growing oil and gas globally focuses on Russia’s invasion of Ukraine due to Russia being a major exporter of energy as well as other commodities. Global energy trade routes have significantly changed due to the collapse of Russia’s natural gas exports to Europe, while in return Europe has banned Russian oil imports.
On top of that, a surge in global energy prices has led governments to accelerate domestic energy production including nuclear, renewables, hydropower, as well as coal. With these factors combined, BP believes primary energy consumption in 2035 to be 2% lower compared to its outlook a year ago. They put down half of the decline due to gains in energy efficiency, with the other half due to lower economic activity.
In the report, BP Chief Economist Spencer Dale said: “The increased focus on energy security as a result of the Russia-Ukraine war has the potential to accelerate the energy transition as countries seek to increase access to domestically produced energy, much of which is likely to come from renewables and other non-fossil fuels.”
Under BP’s three scenarios, oil demand is set to start declining rapidly after 2030. It will however continue to play a major role in the global energy system, with world demand reaching 70 to 80 million barrels per day (bpd) by 2035, compared with today’s consumption of around 100 million bpd.
The predictions by BP also mean significantly lower CO2 emissions as they will be 3.7% lower than in its previous calculations, will peak in the 2020s and will in 2050 be around 30% below 2019 levels.