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Oil demand will peak by late 2030s as electric cars and plastics ban hit, says BP

Rhiannon Curry
By 2040 there will be more than 300 million electric cars being driven worldwide, BP said - Nick Ansell

Growing numbers of electric vehicles and changes in regulations on plastics will cause oil demand to peak by the late 2030s, BP has predicted.

The oil giant’s latest annual Energy Outlook has shown a peak in long-term forecasts for the first time, but the company’s chief economist Spencer Dale denied that this would be followed by a sharp fall in demand.

The outlook, which predicts oil market trends up to 2040 by running scenarios based on current policy, BP said it expects consumption to peak at 110 million barrels per day (bpd) in the mid-2030s. Current consumption is around 97 million bpd.

Part of the reason for this is a 100-fold increase in the number of electric vehicles on the road, BP suggested.

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Based on its scenario, BP said by 2040 there will be more than 300 million electric cars being driven worldwide, around 15pc of the total, although they will account for 30pc of miles travelled as people will use them more intensively than traditional cars.

As a result, fuel demand from the car fleet is forecast to dip to 18.6 million bpd in 2040 from 18.7 million bpd in 2016, when it represented around one fifth of total oil demand.

However, Mr Dale denied this would cause wider demand for oil to fall away.

“The suggestion that rapid growth in electric cars will cause oil demand to collapse just isn’t supported by the basic numbers – even with really rapid growth,” he said. “Even in the scenario where we see an ICE [internal combustion engines] ban and very high efficiency standards, oil demand is still higher in 2040 than it is today.”

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He added that changes in regulations for plastics consumption such as stringent policies on plastic bags and packaging could also dent oil demand.

After 2030, the main source of growth in the demand for oil will be from non-combusted uses, particularly for petrochemicals, BP’s report said.

Meanwhile, renewables will be the fastest-growing fuel source through to 2040, jumping five-fold to meet around 14pc of the world's primary energy consumption, BP predicted. The amount of power expected from renewable sources such as solar and wind is now expected to be 8 terawatt hours in 2035, up from the 5tWh predicted three years ago, marking the fifth year that the figure has been revised upward by BP.

Despite this shift towards greener energy sources, BP’s scenario predicts carbon emissions to rise by 10pc by 2040.

“While this is far slower than the rates seen in the past 25 years, it remains higher than the sharp decline thought to be necessary to achieve the Paris commitments,” the report said.