Oil company BP said the Russia-Ukraine conflict would affect long-term energy demand and accelerate the shift to renewables as countries boost domestic supplies. In its 2023 Energy Outlook, the firm said the war in Ukraine would slow global economic activity by about 3% by 2035 compared with BP's previous forecast, due to commodity price shocks from the conflict.

Under the New Dynamics scenario, which is based on current global energy transition plans, BP lowered its 2035 oil and gas demand forecasts by 5% and 6%, respectively. BP said the effects were concentrated in emerging Asia and the European Union, both of which are currently heavily reliant on oil and gas imports.

BP chief economist Spencer Dale said concerns about energy shortages and vulnerability to geopolitical events had fueled growing concerns about energy security, which was seen as driving national and regional efforts to reduce reliance on imported energy and instead consume more domestic energy. It also provides greater incentives for energy efficiency, reducing the need for all types of energy.

World oil demand will reach 70-80 million barrels per day by 2035, up from around 100 million barrels per day today, BP said. In all three scenarios, total fossil fuel consumption declines over the outlook period. This would be the first time in modern history that demand for any fossil fuel has fallen consistently. At the same time, the share of renewable energy in the global primary energy system is expected to increase from 10% in 2019 to 65% by 2050, driven by falling costs and government policies.

The policy shift will see U.S. solar and wind deployments more than quadruple by 2030 from 2019 levels, BP said. Demand for hydrogen will rise to 4 million tons per year by 2030 and 260,000 tons by 2050, the report said. Hydrogen incentives under the IRA support green hydrogen, which is expected to account for about 60% of low-carbon hydrogen in the U.S. by 2050, up from a previous forecast of about 25%.

The IRA has major implications for the U.S. and the rest of the world, but it also helps highlight the scale of policy support that may be needed to achieve a decarbonization pathway. The International Energy Agency said in its World Energy Outlook in 2022 that the global energy crisis triggered by the Russia-Ukraine conflict could accelerate the transition to renewable energy.

Investment in renewable energy needs to double to more than $4 trillion by the end of the decade to meet the goal of net-zero emissions by 2050, the agency said.Editor/XingWentao