Remember Peak Oil? BP Says It's Coming

But it's not about supply, it's about demand.

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A BP station from when they were in the oil business
A BP station from before they went green.

National Motor Museum/Heritage Images/Getty Images

Remember Peak Oil? That was the prediction made by M. King Hubbert that the easy oil was going to run out and the stuff would get more expensive. Hubbert wrote in 1948: "How soon the decline may set in is not possible to say. Nevertheless, the higher the peak to which the production curve rises, the sooner and sharper will be the decline." Then hydraulic fracturing (fracking) came along and suddenly we were awash in oil and gas.

And remember Beyond Petroleum? That was when BP (British Petroleum) rebranded to be a green machine, co-opted the idea of the carbon footprint, telling us all to "save the world one bike ride at a time," as Treehugger's Sami Grover wrote. Between their distortions and their disasters, it is sometimes hard to take whatever they say seriously.

However, the company's latest Energy Outlook document has some interesting predictions. The report assumes three main scenarios for the energy future:

  • A Rapid Transition scenario where the nations of the world actually live up to their promises and reduce emissions fast and keep below the 2 degrees of warming;
  • A Net Zero scenario which goes even farther and meets the 1.5-degree limit, with carbon emissions dropping by 95% by 2050;
  • A Business-as-usual scenario where we keep bumbling along the way we have been going with slow and pretty much ineffectual change.

Peak Oil is Back

The most interesting predictions happen in the business-as-usual scenario because unfortunately, that is probably where we are heading. And even here, they conclude that peak oil is on its way. “The scale and pace of this decline is driven by the increasing efficiency and electrification of road transportation,” reducing the need for gasoline, and the use of oil and gas in heating buildings declining in a warming world.

"The transition to a lower carbon energy ‎system results in a more diverse energy mix, as all three scenarios see a decline in the share ‎of the global energy system for hydrocarbons and a corresponding increase in renewable ‎energy as the world increasingly electrifies."

Unlike King Hubbert's prediction that was based on a decline in the supply of oil, this one is based on a decline in demand, which of course, the industry is doing everything it can do to avoid, including making a lot more plastic. Rakteem Katakey of Bloomberg notes that the BP scenarios differ from predictions made by others in the industry.

"BP is making a profound break from orthodoxy. From the bosses of corporate energy giants to ministers from OPEC states, senior figures from the industry have insisted that oil consumption will see decades of growth. Time and again, they have described it as the only commodity that can satisfy the demands of an increasing global population and expanding middle class."

But BP notes that the industry took a big hit from the pandemic and might not ever fully recover.

"The pandemic may also lead to a number of behavioural changes; for example, if people choose ‎to travel less, switch from using public transport to other modes of travel, or work from home ‎more frequently. Many of these behavioural changes are likely to dissipate over time as the ‎pandemic is brought under control and public confidence is restored. But some changes, such as ‎increased working from home, may persist.‎"

The new CEO of BP says he is putting his pounds into green energy in response to these predictions. According to Bloomberg, "Chief Executive Officer Bernard Looney said in August he’d shrink oil and gas output by 40% over the next decade and spend as much as $5 billion a year building one of the world’s largest renewable-power businesses."

Green or Greenwash?

BP ads
BP ads from around 2010.  British Petroleum

But is this just deja vu all over again? We have been through this before, when CEO John Browne rebranded the company as Beyond Petroleum. But as Eric Reguly notes in the Globe and Mail, "The transformation went nowhere. BP realized it was better at drilling holes than operating wind and solar farms and got rid of them shortly after Beyond Petroleum was rolled out." Reguly writes:

"BP might be greenwashing itself again by pledging to embrace a net-zero future, to the point that it is writing off huge chunks of value in its hydrocarbon business. If Mr. Looney wants to emerge as the man who transformed BP into a green-tinged, diversified energy company, he will have to follow up with some firm spending and milestone commitments to embrace beyond doubt that BP’s future is 'Beyond Petroleum.' If he doesn’t, BP will remain part of the climate problem, not the solution."

The pandemic may have caused pandemonium in the oil industry temporarily, but the fact remains that every gallon of gas saved by electric cars has been more than offset by the increase in consumption caused by the switch to pickup trucks and SUVs. I suspect that even BP's business-as-usual scenario is optimistic.