The emergence of self-driving electric cars and travel sharing are set to dent oil consumption by 2040, oil and gas giant BP said, forecasting a peak in demand for the first time.
In its benchmark annual Energy Outlook, BP forecast a 100-fold growth in electric vehicles by 2040, with its chief economist Spencer Dale painting a world in which we travel much more but instead of using private cars, we increasingly share trips in autonomous vehicles.
While travel demand more than doubles over the period as economies in countries such as China and India grow, higher oil demand will be more than offset by increased engine efficiency standards as well as the larger number of EVs and shared traveling.
Unlike many other forecasts, including previous BP Energy Outlooks, which looked solely at the growing share of EVs in the car fleet, BP this year focused on the share of vehicles kilometers powered by electricity.
Under BP's Evolving Transition scenario, which assumes that policies and technology continue to evolve at a speed similar to that seen in the recent past, some 30 percent of car kilometers are powered by electricity by 2040 from almost zero in 2016.
At the same time, the number of EVs is set to increase from 3 million today to over 320 million by 2040, representing roughly 15 percent out of a total car fleet of 2 billion.
The gap between the increasing number of EVs on the road and the kilometers powered by electricity is due to the expected growth in so-called shared mobility by EVs, Dale said.
"Cars will be used much more intensely over time," Dale told reporters in a briefing on Monday ahead of the release of the report on Tuesday.
As a result, fuel demand from the car fleet is forecast to dip to 18.6 million barrels per day (bpd) in 2040 from 18.7 million bpd in 2016, when it represented around one fifth of total oil demand, according to BP.
BP expects autonomous vehicles to become available in the early 2020s. Their initial high cost means the vast majority of the cars will be bought by fleets offering shared mobility services.
The average electric car is expected to be driven about two-and-a-half times more than an internal combustion car, according to Dale.
"What we expect to see in the 2030s is a huge growth in shared mobility autonomous cars ... Once you don't have to pay for a driver, the cost of taking one of those share mobility fleets services will fall by about 40 or 50 percent," Dale said.
The vast majority of the shared mobility is expected to be EVs because of their lower maintenance costs.
Car makers including General Motors and high-tech giants such as Google Waymo and Uber Technologies have poured billions into the autonomous vehicles industry hoping gain a first-mover advantage. Robo-taxi services are seen as the main use for most self-driving vehicles.
BP sharply raised its estimate of growth in electric vehicles in the coming decades from last year's forecast that EVs would reach 100 million by 2035. The big upwards revision is due to an increase in hybrid cars and an expected sharp growth in EV purchases in the second half of the 2030s, Dale said.
London-based BP joined other oil companies such as Royal Dutch Shell in forecasting a peak for oil demand in the late 2030s, when it is expected to slightly decline at around 110 million bpd.
It did not foresee a peak in demand in its previous outlooks that stretched into 2035.
While the transportation sector will continue to dominate the growth in oil consumption, demand for plastic manufacturing will become the main source of growth in the 2030s.
Oil companies such as BP, Shell and France's Total are betting on growing demand from the petrochemical sector in the coming decades.
Dale however said changes in regulations for plastics consumption such as stringent policies on plastic bags and packaging could dent oil demand by as much as 2 million bpd, roughly the same as the impact of EVs.
Overall energy demand will continue to grow in the coming decades, rising by a third into 2040, or roughly 1.3 percent per year, driven by growth in China and India, but the world is learning to "do more with less energy" as economies become more efficient, Dale said.
For example, the European Union's gross domestic product is set to treble in 2040 from 1975 but the level of energy demand will be the same.
China's energy demand will continue to grow but at a slower pace by the 2030s, when India will become the main driver of growth.
BP once again revised upwards its forecast for growth in renewable power, which is set to grow by 40 percent by 2040, with its share in the energy mix increasing from 4 percent to 14 percent.
The revision is due to technological gains as well as more aggressive government policies, particularly in India and China.
"There is plenty of scope for policy to continue to surprise us" to further boost the growth in the renewables, Dale said.