A Commentary on BP's Energy Outlook 2035

BP just released their annual report on energy outlook for the coming year. This information is all coming after another report showed that overall spending on oil exploration has not been affected by falling oil prices. Oil companies are not showing a sign of slowing down. The introduction starts by saying that the oil market is one full of constant and unpredictable change, which almost immediately discredits the accuracy of predictions BP is making for 2035.

But regardless, BP is predicting an increase in the demand for energy in the future, due to increasing population. In a clear bias, they neglect that our energy usage will also definitely become more efficient between now and 2035. The increase in efficiency could potentially offset any increase in demand, so it is strange that BP did not factor that in. This important variable is also reflected in the fact that the vast majority of energy consumption growth is coming from non-OECD which presumably have a less energy efficient infrastructure.

Another interesting part of the report is the discussion of unconventional sources of energy (renewables, shale, tight oil). BP predicts very rapid expansion of these sources, specifically that they will triple in production by 2035. This naturally implies that part of BP's hypothesis is that oil prices will either raise to make these alternative forms of production sustainable and profitable, or that technological innovation will lower the costs of alternative energy to make them profitable at lower prices. In my opinion, they probably lean towards the former.

The report also mentions a prediction for US self-sufficiency. None of this is particularly good news for the Middle-east, but BP is still predicting a long term recovery in market share for OPEC.

In summary, the BP report has some important holes that affect it's credibility. In my opinion, it's just an attempt to bring back some optimism to the oil market, but the report does show that alternatives to conventional oil are here and expected to stay regardless of the current environment.

- Sashank Parigi