Outlook explained: 7 things to know about the energy future

Last edited: 10 February 2016

BP’s Energy Outlook delves into masses of data to pinpoint the main forces that will shape the energy markets over the next two decades. Here, chief economist Spencer Dale talks us through the headlines

1. Economy drives: energy demand will continue to rise…

“The demand for energy will grow over the next 20 years, driven by the expansion in the global economy. As the world economy grows, more energy will be needed to fuel that higher level of activity.

Faster gains in energy efficiency are likely to dampen some of this growth. And, there remains considerable uncertainty as to how quickly global gross domestic product (GDP) will increase. But, even in a world of far slower growth, we’re still likely to see steady, material increases in energy demand.”

2. Changing of the guard: expect to see a shift in the fuel mix…

“We’re looking at strong growth in gas, very rapid growth in renewables – solar and wind power in particular – and a sharp slowdown in the growth of coal. This represents quite a shift in the fuel mix.”

3. Time for action: carbon emissions growth from energy set to slow…

“The growth rate of carbon emissions from energy is expected to more than halve over the next 20 years, compared with the last two decades. This reflects two factors: faster gains in energy efficiency and the shift towards lower-carbon fuels. On the most likely path, however, carbon emissions continue to increase, indicating the need for further policy action.”

4. Look east: China’s changing energy needs alter the big picture…

“As the world’s largest consumer of energy, China has a huge influence on the global market. But its energy needs are changing as its economy goes through a process of rebalancing. Over the past 15 years, its GDP growth has averaged around 10% - but over the next 20 years, we expect it to average around 5%, with energy demand growth falling by a factor of four.”

What looks set to happen in China?

  • A changing consumer: slower economic growth results in slower growth in energy demand
  • A shifting economy: from energy-intensive sectors, such as manufacturing, towards more service-orientated, less power-hungry sectors
  • A modified fuel mix: less reliance on coal and strong growth in renewables, nuclear and gas

5. Going steady: oil and gas growth likely to match that of last two decades…

“Fossil fuels will remain the dominant source of energy powering the world economy. The demand for oil will continue to grow over the next 20 years, largely stemming from the strong growth in developing economies. The story is a simple one: as those economies get wealthier, vehicle ownership increases and oil products are needed to fuel those cars and motorcycles.

We think gas is likely to become the fastest-growing fossil fuel over the next 20 years. That is helped by strong growth in supplies – US shale gas, for example, and liquefied natural gas which is far more tradable – as well as increasing environmental regulation, that encourages the switch away from carbon-intensive fuels, such as coal.”

6. Crowding out conventionals: how shale might continue to surprise…

“We, along with most other commentators and forecasters, have been consistently surprised by the strength of US shale gas and tight oil. We see both of these continuing to grow over the next two decades; for tight oil, we see that growth slowing because the resource base will become increasingly constrained.

But US shale gas resources look far larger based on current estimates, so we see sustained rapid growth over the next 20 years. Shale therefore becomes increasingly important in the global supply of gas.

Could we be surprised again by shale? Perhaps. So, whereas in our ‘base’ case, we see shale gas accounting for around 25% of global supplies, in our alternative case – that assumes even greater potential – shale gas accounts for almost a third of global supplies by 2035.”

7. No crystal ball: predicting the world’s energy needs is not a precise science…

“The point of the BP Energy Outlook is not to pretend we have a crystal ball so that we can predict the future exactly. We try to summarize the main forces that are shaping the energy markets – and the various types of uncertainties around them.  

Do we get everything right? Not all of the time, but we do careful, objective analysis. This year, we’ve devoted considerable time to think about how things have evolved differently to what we expected in the past. So, we’ve made sure those lessons are built into the 2016 projections, such as revising our renewables forecast up from last year.”