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Energy Insights: Energy News: BP's peak oil rejection

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BP's peak oil rejection


For the first time since the industrial revolution the world is moving into an era without a dominant energy source. That's the assertion of global oil giant BP, which is also offering a reality check on the notion of peak oil.

The company’s general manager of global energy markets and US economics, Mark Finley, is adamant that natural gas, coal and oil will all scrap for the top spot over the next two decades.

The assertion comes on the back of a January release of BP’s latest 2035 energy market outlook, which highlighted a convergence of the fuels at the top of the energy tree in 20 years’ time.

Graph for BP's peak oil rejection

Source: BP Energy Market Outlook 2035.

“We’ve never seen this before,” Finley explains of the fight for the top spot during a recent speech at Columbia University in New York. “Personally, I think it poses some important geopolitical questions. What does it mean if the world doesn’t have a dominant fuel?”

While that question has been left unanswered for now, one thing that is clear is BP’s view on the theory of peak oil: it’s dead.

“We’ve tracked true reserves of oil and gas in the statistical review since 1980 and they do literally nothing but go up all the time,” Finley declares.

“In fact, since 1980 the world has cumulatively produced more oil than it had officially and yet proved reserves have (still) more than doubled over that period.”

Last month BP chief executive Bob Dudley was more matter-of-fact, proclaiming “the theory of peak oil (had) peaked”.

BP also holds unreserved confidence that the world has sufficient energy to meet the increased demand that comes with economic growth.

“The (main) reasons for this are unconventional sources of oil production, shale gas production and the growth of renewable sources of energy. These three sources alone account for almost half of all of the growth of the world’s energy production in our outlook,” Finley, a key player in developing the 2035 outlook, reveals.

“Newer forms of energy are coming on the scene in a material way.”

Graph for BP's peak oil rejection

Source: BP Energy Market Outlook 2035.

Assisting this bullish outlook on fuel supplies is the change in the correlation between energy demand and economic growth.

Over the past couple of decades, the gap between energy demand and GDP growth has grown into a chasm as the world becomes more efficient. That space is only likely to widen (see below).

Graph for BP's peak oil rejection

Source: BP Energy Market Outlook 2035.

Across BP’s outlook period, energy demand is anticipated to climb 41 per cent while the global economy more than doubles and Beijing politics play a key part in the slowing down of demand.

“We believe that China will reach a point where the mode of economic development will begin to shift from energy-intensive, export-led growth to less energy-intensive domestic consumption of goods and services,” Finley says.

That shift is widely tipped to hurt Australia, particularly the coal sector, as coal takes the mantle in around a decade as the slowest-growing fuel. The move away from coal will turn into a sprint on expected government policy action, along with the aforementioned Chinese focus, according to Finley.

Coal joins oil as a relatively unloved fossil fuel in the outlook period, with black gold failing to curb a market share retreat that began alongside the oil crisis of 1973.

“Oil has done nothing but lose market share ever since,” the BP exec says. “And you can see in our outlook it continues to do so.”

Despite this, all energy forms manage to grow over the outlook, though there is a rare glimpse of good news for the climate.

“The fastest growing fuel by far are renewable forms of energy, which grow by about 6.5 per cent a year. That is to say around four times faster than (other sources), albeit from a relatively small base,” Finley says.

The findings lead BP to address the key themes for this outlook – sufficiency, security and sustainability.

Finley admits we are “not on a sustainable trajectory” and concludes energy security depends entirely on where you are in the world. He says supply will comfortably keep up with demand.

It is the latter point where BP displays the greatest confidence. In so doing, the British firm has firmly placed peak oil theory in the corner.

Daniel Palmer is Business Spectator's North America correspondent @Danielbpalmer

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