Over the next few decades, population and income are projected to rise, resulting in greater demand for energy that is affordable, secure and sustainable
Growing demand for energy
Access to affordable and secure energy is essential for economic prosperity. Energy provides heat and light for homes, fuel for transportation and power for industry. And, everyday objects - from plastics to fabrics - are derived from oil. The world economy is likely to more than double from 2014 to 2035, largely driven by rising incomes in the emerging economies and a projected population increase of 1.5 billion. We expect world demand for energy to increase by as much as 34% between 2014 and 2035. This is after taking into account improvements in energy efficiency, a shift towards less energy-intensive activities in fast-growing economies, governmental policies that incentivize lower-carbon activity and national pledges made at the 2015 UN climate conference in Paris. There are more than enough energy resources to meet this growing demand, but there are a number of challenges.
GDP, energy and emissions
Energy use and related CO₂ emissions are expected to increase at slower rates than economic growth, thanks to innovation leading to energy efficiencies and lower-carbon intensity.
Source: BP Energy Outlook
Fossil fuels are currently cheaper than renewables but their future costs are hard to predict. Some fossil fuels may become more costly as the difficulty to access and process them increases; others may be more affordable with technological progress, as seen with US shale gas. While many renewables remain expensive, innovation and wider deployment are likely to bring down their costs.
Energy resources are often distant from the hubs of energy consumption and in places facing political uncertainties. More than half of the world’s known oil and natural gas reserves are located in just eight countries.
Fossil fuels - though plentiful and currently more affordable than other energy resources - emit carbon dioxide (CO₂) and other greenhouse gases through their production and use in homes, industry and vehicles. Renewables are lower carbon but can have other environmental or social impacts, such as high water consumption or visual intrusion.
All sorts of energy are required
We believe a diverse mix of fuels and technologies is needed to meet growing energy demand, while supporting the transition to a lower-carbon economy.
Oil and natural gas
Over the next few decades, we think oil and natural gas are likely to continue to play a significant part in meeting demand for energy. They currently account for around 56% of total energy consumption, and we believe that will decrease to about 54% in 2035. For comparison, under the International Energy Agency’s most ambitious climate policy scenario* (the 450 scenario), oil and gas would still make up 50% of the energy mix in 2030 and 44% in 2040 - assuming carbon capture and storage is widely deployed. Oil is a good source of energy for transportation as it has a high energy density. That means vehicles go further on less weight and volume of fuel than alternatives. Also, oil’s liquid form makes it easy to move around, globally and locally. For these reasons, we expect oil to still account for almost 90% of transportation fuels in 2035 - compared with 94% today. Natural gas is likely to play an increasing role in meeting global energy demand, because it’s available at scale, relatively low cost and lower carbon than other fossil fuels. By 2035 gas is expected to provide 26% of global energy, placing it on a par with oil and coal. We believe shale gas will contribute more than half of the growth in natural gas globally between 2014 and 2035. In the US, the growth of shale gas has already had a significant impact on gas demand as well as CO₂ emissions, which have fallen back to 1990s levels. The increasing gas supply in the US and other countries is encouraging the use of liquefied natural gas worldwide, which is expected to double between 2014 and 2035.
* From World Energy Outlook 2015. © OECD/International Energy Agency 2015, page 35. The IEA 450 scenario assumes a set of policies that bring about a trajectory of greenhouse gas emissions from the energy sector that is consistent with limiting long-term average global temperature increase to 2°C.
Renewables are the fastest-growing energy source. Over the past few years, there has been rapid expansion of the use of solar power due to cost reduction in manufacturing and public subsidies. That said, renewables, excluding large-scale hydroelectricity, currently account for around 3% of energy consumption. While they are starting from a low base, we estimate that by 2035 they will contribute around 9% of total global energy demand.
Energy consumption (billion tonnes of oil equivalent)
Today around 32% of energy consumed comes from oil, 30% from coal, and 24% from gas - so 86% from fossil fuels in total. Hydroelectricity accounts for 7%, nuclear for 4% and other renewables for just 3%.