Global Energy Perspective: Accelerated Transition

Every year, we publish our Global Energy Perspective to help our clients understand the implications of the energy transition. The perspective builds on our Reference Case, which captures our view of how energy demand will evolve over the next few decades. However, it is challenging to project the speed with which the transition will take place and the magnitude of the resulting shifts in our energy systems, as these shifts are inherently complex and can be affected or reinforced by other shifts. To account for a world in which the energy transition occurs faster and to a greater degree than in our Reference Case, we have developed this outlook, which reviews the impact of eight potential shifts that could further accelerate the energy transition.

The economy is in the midst of a fundamental energy transition that affects how we fuel our vehicles, heat our homes, and power our industries. Many of the changes that make up this transition are changes away from inefficient technologies, such as internal combustion engine (ICE) cars and oil/gas boilers, toward electrified and higher-efficiency alternatives. There is also a trend toward cleaner power generation from renewables. For companies, governments, and individuals alike, these developments require significant adaptation. Whether one is searching for new value pools in clean or renewable technologies or preparing for challenges with existing business models, the implications are widespread.

With the speed and magnitude of these changes evolving rapidly, we’ve identified eight potential shifts that could further accelerate the energy transition. Although these eight shifts may not represent the most probable future, they should be considered conceivable based on the developments that can be observed today:

• Shift 1: Faster uptake of electric vehicles (EVs). Accelerated EV uptake—to 100 percent for vehicle fleets in China, Europe, and North America and 50 percent in the rest of the world by 2050—minimizes demand from road transport, today’s biggest oil demand sector
• Shift 2: Improved efficiency gains and increased uptake of low-emission fuels for aviation and marine. Meeting the aviation and marine transport sectors’ 50 percent emission- reduction targets adversely affects oil demand growth
• Shift 3: Accelerated electrification of residential heat. Heating 50 percent of the homes in Europe and North America with electric heat pumps by 2050 slows down global gas demand growth
• Shift 4: More rapid electrification of cooking in non-Organization for Economic Co-operation and Development (OECD) Africa and Asia. Accelerated electrification of cooking strongly increases power demand growth
• Shift 5: Increased demand reduction and recycling of plastics. Plastic bans, more efficient use of plastics, the replacement of plastic with alternative materials, and recycling affect demand for petrochemicals, the largest driver of global oil demand growth
• Shift 6: More efficiency gains, recycling, and low-emission feedstock in iron and steel production. Improvements in energy efficiency and the carbon intensity of iron and steel production decreases industrial coal demand globally
• Shift 7: More extensive electrification of EU industry low- and medium-temperature heat. Electrification of low- and medium-temperature heat in Europe reduces gas demand for the third largest sector in the region
• Shift 8: Accelerated cost reduction for renewables and storage. Renewables and battery storage become the cheapest power source at scale, outcompeting fossil fuels

For each of these shifts, this outlook presents the impact they could have on annual oil, gas, coal, and power demand.