BP: Oil Outlook 2040

BP recently came out with their 2040 energy report. For the purposes of this blog, I'm most interested in their oil outlook. From what I can tell from the data, their forecast is that oil demand will peak between 2035 - 2040. The reason for the range is that their oil consumption is forecasted in 10 year increments so they're not providing yearly forecasts from 2030 to 2040.

For example, 2030 is at 4,864 million tonne of oil equivalent (toe). All energy sources is at 16,317 toe.

In 2040, oil declines to 4,836 (toe). All energy sources increase to 17,983.

So obviously sometime between 2030 to 2040, oil consumption declines.


They do forecast their share of primary energy in 5 year increments. Oil percentage is as follows:

2030: 29.8%
2035: 28.5%
2040: 26.9%

My bet is that BP sees peak oil demand being reached in 2035.

My assumption is that total energy requirements in 2035 will be 17,128 toe and in 2036 17,295. I'm using a CAGR of slightly less than 1% for annual energy growth (2030 - 2040) to get there. From 2035 to 2040, I'm applying close to a 1% decline in oil as a percent of total energy. Based on this, oil is at 28.5% in 2035 per their records and I come up with 28.2% in 2036.

So my calculation is that in 2035 we have 17,128 toe (my number) * 28.5% oil (BP number) = 4,882 toe of oil.

In 2036, we have 17,295 toe (my number) * 28.187% oil (my number) = 4,875 toe of oil.

That's a lot of numbers so in summary I believe BP's forecast is for peak oil demand to be reached in 2035. The peak oil demand year I've used is 2040. Let's be honest, if oil is at 4,864 in 2030 and declines to 4,836 in 2040, we basically flat line for ten years.

Reuters has the headline that states that BP sees electric vehicles squeezing oil demand by 2040. I personally think they didn't dig into the numbers much as I think BP sees oil demand declining before 2040; however, the articles do provide some interesting additional details from the BP research paper.

For example:

First: there will be a 100-fold growth in electric vehicles by 2040. Of course, since there are hardly any electric vehicles out there that growth rate isn't unexpected.

Second: a better fact of the impact of electric cars is that CNBC mentions that 30% of car kilometers driven will be done via electric vehicles. So even come 2040, gas/hybrid vehicles will account for 70% of all car kilometers driven.

Third: BP believes that 15% of all cars will be electric.

Fourth: the reason electric vehicles will make up 15% of the car fleet, but make up 30% of car kilometers is due to the belief that we will move towards a car sharing economy.

So why would electric vehicles make up only 15% of the worldwide fleet come 2040? One issue I was thinking about is those in the US and other parts of the world that live in apartments and condos. I found this one article on Evercharge (don't know knowledgeable this site is) that has the following quote:

This hits apartment and condo dwellers who own or want to own electric cars hardest as most buildings will force residents to foot the bill if they want on-site electric car charging. Many times these upgrades cost tens if not hundreds of thousands of dollars.

Yeah, no matter how much one wants an electric vehicle, if you live in an apartment or condo, coming up with thousands of dollars above the price of a vehicle for energy upgrades is a lot to ask.