A BP report released on Monday has shown that Russia’s war in Ukraine is expected to weigh on long-term energy demand and accelerate the world’s shift to renewables and low-carbon power as countries boost domestic energy supplies.
In its benchmark 2023 Energy Outlook, BP Plc said that the Ukraine war will slow global economic activity by 2035 by around 3% compared with last year’s forecast due to higher food and energy prices as well as reduced trade activity.
BP lowered its oil and gas demand forecast in 2035 by 5% and 6%, respectively, under its central forecast scenario that is based on governments’ current energy transition plans. The changes are focused mostly in Europe and Asia which rely heavily on energy imports, BP said.
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Under its three scenarios, global energy demand peaks between the late 2020s and 2035, according to BP, whose Chief Executive Bernard Looney aims to rapidly grow the company’s renewables business and slash oil and gas output by 2030.
But global energy trade routes changed dramatically following the war, particularly after Moscow halted most of its natural gas exports to neighbouring Europe while Europe banned imports of Russian oil.
At the same time, a surge in global energy prices last year led governments to accelerate domestic energy production including nuclear, renewables, hydropower and coal.
Put together, BP expects primary energy consumption in 2035 to be lower by 2% compared with last year’s outlook, with half of the decline due to gains in energy efficiency and a half due to lower economic activity.
“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,” BP Chief Economist Spencer Dale said in the report.
Oil demand is set to start declining rapidly after 2030 under BP’s three scenarios, but will 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.
Story was adapted from Reuters.
