An uneasy alliance: can the world be less reliant on oil?
07 May 2019
Oil powers the cars we drive and the flights we take; it heats many of our homes and offices. It is in things we use every day, and it plays an integral role across industries and economies. Yet it has become very clear that the relentless burning of fossil fuels cannot continue unabated.
The United Nations’ Intergovernmental Panel on Climate Change (IPCC) recently warned that a 2015 pledge by governments to restrict global warming to 2 degrees Celsius above pre-industrial levels will not be enough. It recommended that average temperature rises be capped at 1.5 degrees to avoid irreversible environmental damage.
To achieve the global emissions pledge by 2050 and limit temperature rises to agreed targets, oil demand may need to fall 30%. Our Research team investigated whether the globe’s estimated oil needs for the next few decades could be compatible with such a drop.
Oil demand is expected to remain flat to slightly down by 2050
Source: BP Statistical Review for historic data. Barclays Research for forward looking estimates.
Going forward, oil is likely to remain an important player in the energy mix: alternatives that provide the capacity to support growing populations and economies do not yet exist. But by 2050, the world will undoubtedly look different as advances in renewable energy, technological innovation and strict low-carbon policies help to ease the reliance on fossil fuels.
Renewables could comprise 30% of the energy mix by 2050. Will that be enough? See the key findings from Barclays Research.
Which sector will have the biggest thirst for oil by 2050?
Our analysts believe the following four consumption trends will dominate:
Passenger cars will need less oil
There will be more cars on the road, but with greater fuel efficiency and increased uptake of electric vehicles. The Cars sector is expected to constitute about 15% of total oil demand, down from 22% today.
The global trucking fleet will increase, tied to global economic growth
Despite potential efficiency gains and adoption of electric vehicles over time, 97% of the current trucking fleet is still powered by gasoline and diesel.
It remains highly unlikely that a large-scale replacement for jet fuel will emerge any time soon
As the demand for air travel grows, the Aviation sector will place greater demand on oil reserves.
Petrochemicals will continue to grow
As the base for all plastics and much else, the demand for petrochemicals has increased over 50% in the last 10 years. As the world economy and the global population continue to grow, this sector is expected to overtake transportation in the 2020s or 2030s as the biggest contributor to oil consumption.
Mb/d = million barrels per day
While we can expect some new efficiencies in the next 30 years, to achieve the global emissions pledge by 2050, radical change needs to occur at a global level to reduce oil demand. This involves a fundamental shift in the way governments, companies and individuals prioritise long-term investments over short-term economic gains.
Read our full report to learn more about how efforts to curb global warming will affect the world’s need for oil over the next 30 years.
Lydia Rainforth is a Managing Director in our Equity Research team with close to two decades experience in the energy sector. Lydia started at Barclays in 2009 where she joined the nascent European equity research team. Prior to this Ms Rainforth started her career covering Russian oil and gas companies at Lehman Brothers. The Global Energy team aims to provide industry leading and thought provoking research across the industry from the early stages of exploration through to the end retail business.
Lydia & team have a special interest in the development of renewable energy and the growing role of environmental, social and governance factors in investing. Ms Rainforth holds a first class honours degree from the University of Cambridge.