Spencer Dale, chief economist
The past year has been dominated by the terrible consequences of the Russia-Ukraine war and its awful toll on lives and communities. Our thoughts and hopes are with all those affected.
From an energy perspective, the disruptions to Russian energy supplies and the resulting global energy shortages seem likely to have a material and lasting impact on the energy system.
Global energy polices and discussions in recent years have been focused on the importance of decarbonizing the energy system and the transition to net zero. The events of the past year have served as a reminder to us all that this transition also needs to take account of the security and affordability of energy. Together these three dimensions of the energy system – security, affordability, and sustainability – make up what we call the energy trilemma. Any successful and enduring energy transition needs to address all three elements of the trilemma.
Last year’s Energy Outlook did not include any analysis of the possible implications of the war in Ukraine. The scenarios in Outlook 2023 have been updated to take account of the war, as well as of the passing of the Inflation Reduction Act in the US.
At the time of writing, the war is continuing with no end in sight. As such, any analysis of its possible implications must be treated as preliminary. However, the experience from the major energy supply shocks of the 1970s suggests that events that heightened energy security concerns can have significant and persistent impacts on energy markets. Most importantly, the desire of countries to bolster their energy security by reducing their dependency on imported energy – dominated by fossil fuels – and instead have access to more domestically produced energy – much of which is likely to come from renewables and other non-fossil energy sources – suggests that the war is likely to accelerate the pace of the energy transition.
The scale of the economic and social disruptions over the past year associated with the loss of just a fraction of the world’s fossil fuels has also highlighted the need for the transition away from hydrocarbons to be orderly, such that the demand for hydrocarbons falls in line with available supplies, avoiding future periods of energy shortages and higher prices.
These issues, together with the broader implications of the energy transition, are explored in this year’s Energy Outlook using three main scenarios: Accelerated, Net Zero and New Momentum. Together these scenarios span a wide range of the possible outcomes for the global energy system over the next 30 years. Understanding this range of uncertainty helps bp to shape a strategy which is resilient to the different speeds and ways in which the energy system may transition.
The continuing rise in carbon emissions and the increasing frequency of extreme weather events in recent years highlight more clearly than ever the importance of a decisive shift towards a net-zero future. The events of the past year have highlighted the complexity and interconnectedness of the global energy system and the need to address all three dimensions of the energy trilemma. I hope this year’s Energy Outlook is useful to everyone trying to navigate this uncertain future and accelerate the transition to global net zero.
As always, any feedback on the Outlook and how it can be improved would be most welcome.