It is worth noting that many key long-term reports—such as the IEA’s and BP’s—are most likely going to see significant revisions given both organisations’ pivots to more supportive oil and gas mindsets.
It would be naive to not contextualise the outlook based on the creator, but of similar importance is the moment in time in which the outlook originated. That is true not just in terms of recency bias, but for example broader questions around whether China’s long-term demand should be formulated with it being extrapolated from its current economic and deflationary malaise.
The three biggest factors that could alter the course of Petroleum Economist’s 2050 trajectory for oil and gas are technology, policy and narrative. Technological shifts are hard to predict and the role of cost and convenience in fuel should not be undervalued, while the unintended consequences of a tech change should also be considered, such as the strain on copper resources and critical minerals for electric vehicles (EVs), or how AI will most likely require an exponential change in gas-to-power.
Policy is also huge in creating the right sticks and carrots to level playing fields between different fuel types. as well as in how these decisions can impact price and investment: taxing and thwarting oil and gas investment in the UK’s North Sea, for example, can raise the cost of energy, hurt demand and allow even more unclean energy sources to thrive elsewhere.
Countries cannot operate in policy silos even if their energy journeys and specific strengths and weaknesses are unique. Meanwhile, narrative is crucial. Just look at the battle of wills between the IEA and OPEC; the rise of sustainability and its retreat; the role of ESG and its reconfiguration; how coal, oil and gas get lumped into the same bracket as political PR spin; how nuclear is still not touched despite being a clean, scalable solution; and how CCS has been unfairly derided as a tool for oil and gas to hide behind rather than a critical solution for hard-to-abate sectors.
Narrative and geopolitics are closely intertwined. How states interact; the role of COP as an effective way forward; and the role of trade, tariffs, war and sanctions will all shape the credibility and effectiveness of various solutions and investment in them. The crucial role price will play and expectations around future price should also be noted. As the adage goes, the cure for high prices is high prices, and the same is true for low prices. Expectations for lower oil and gas prices will cause investment to slow and could increase energy emergencies in the coming decades unless a measured approach to investment is achieved.
This also applies to oil and gas becoming too expensive, causing a rush of investment and a price crash and prompting oil and gas to undercut cleaner options even more. Meanwhile, any sign of climate emergencies could see governments panic, and that could have a huge impact on price. Coal has stayed a stubborn part of the energy mix due to its relative cheapness, despite its relatively high emissions. Moving away from it has not been the easy win it could have been and has meant renewables and gas have jostled to be the dominant substitute, especially in power generation.
The summary
Petroleum Economist’s view is unique: it is truly independent. No stakeholders with skin in the game, no wishful thinking nor reverse engineered scenarios. It is a central view extrapolated from the current set of assumptions and insights based around supply, demand and price interplay.
Yes, we are an oil and gas publication, but that only helps our understanding—we are not in the business of telling our readers what they want to hear, but what they need to hear. If we really thought peak demand was coming soon, we would give you that warning. Instead, we offer a message to have the courage of your convictions and not fall into BP’s earlier trap, for example.
The oil and gas industry has made great strides in creating efficiencies and reducing emissions through its operations, and by investing in gas it can bring down the price and significantly lower CO₂ by taking much of coal’s share in the primary energy mix. On the flipside, the glut in oil and LNG will also lead to increased competition for market share among suppliers and—in our view—carries the risk of LNG in particular crowding out renewable energy development in different parts of the world, notably in Asia, creating fossil fuel lock-in.
Gas, instead of being squeezed by renewables on one side and coal on the other, could come out on top, so to speak, with renewables still finding their place in Europe in particular. Oil also has a big role to play in meeting growing petrochemical demand, and there are huge risks to believing EVs, especially for light commercial use, will have the mass rollout some advocates think. Much hinges on cheap Chinese vehicles making huge inroads into the global market.
The number of EVs on the roads has risen rapidly, with sales increasing from 2m in 2019 to around 17m in 2024. This growth has been underpinned by vehicle emissions regulations— especially in China, the EU and the US. However, protectionism, copper supply challenges and cost could still prove to be huge sticking points. Hence, gas should grow extensively and oil should remain robust even through to 2050.
In fact, in our outlook, there is still a plausible risk of peak supply making a worrying and unfashionable comeback without the right efforts made in E&P and without sufficient energy investments in technology, such as nuclear. Progress on improving energy efficiency has been disappointing. The amount of energy used per unit of economic activity has fallen by a little over 1% per year over the past four years on average, but we see there are huge opportunities for a galvanised oil and gas industry less intent on wasting resources and efforts on the wrong clean tech.
The energy additions from low-carbon sources have not, however, been sufficient to meet the growth in total global energy demand, meaning the use of fossil fuels has continued to increase. Fossil fuel consumption reached a new high in 2023, driven primarily by rising oil consumption.
Upstream oil and gas investment totalled $550b in 2023. Although investment remains below the peak seen in the early 2020s, production has continued to grow steadily, supported by improved productivity, but more may need to be done in the decades ahead, complemented by the right options to cut emissions.
The disruptions to global energy supplies associated with the war in Ukraine have increased the importance attached to ensuring secure and affordable energy while also achieving Paris climate goals. This greater focus on safeguarding energy security includes many countries placing more weight on ensuring the security of their key low-carbon-energy value chains.
And, finally, a word on the tumultuous time in which this outlook is being written—in the middle of a China-US trade war, and when geopolitical and trade dynamics and configurations could be completely rewired. This could have huge implications on long-term energy use, policies and cost, and we are unlikely to know the full extent of the fallout for many months, perhaps years, ahead. History and the energy narrative, as usual, will be written by the eventual winners.
All told, the crystal balls may not be able to tell the future of energy, but they can certainly influence behaviour based on the warnings and guidance they give. It is an important reminder when planning for the future, as our energy needs depend on it.
To read the first part of our 2050 energy outlook, click here. To read part two, click here.
Comments