British energy giant BP p.l.c. (BP - Free Report) provides an energy market outlook every year, which presents the future possibilities based on the present and past market scenario. The common takeaway from the outlooks is that the demand for energy will continue to rise, while the source of energy will evolve at a slow rate. The company expects global energy demand to grow around 1.3% per annum till 2040, which will come largely from the emerging economies in Asia and Africa.
The company also expects demand for cleaner energy and environmental regulation policies to increase the consumption of natural gas and other energy sources. Oil, however, is expected to see a dent in consumption by 2040, which will likely come from rising number of electric cars.
Autonomous vehicles, hybrid cars, electric cars, engine efficiency and trip sharing conveyances are expected to change the automobile industry’s view by 2040, upon which the energy sector is largely dependent. Moreover, the company focused more on an Evolving Transition of the market rather than sticking to a base period for future predictions. As a result, it expects that within 2040, 30% of the covered car kilometers are powered by electricity compared to nearly zero a few years back.
What About Oil?
All these leave oil, as we know, in a tough situation. Unlike its previous outlooks, BP forecasted oil demand to peak this time by the late 2030s, hitting 110.3 million barrels a day, and then decline gradually. Oil is expected to reach that peak on the back of demand for plastic manufacturing, while the transportation sector will continue to rule the oil consumption growth. Companies like Royal Dutch Shell plc (RDS.A - Free Report) and Total S.A. (TOT - Free Report) are also venturing the rise in demand, which is stretching from the petrochemical sector. Moreover, BP expects production efficiencies to rise so much that GDP of the countries will grow without pulling the level of energy demand.
For summing it up, the oil future seems bright till 2040, after which the brightness will slowly disappear. BP's recent prediction of oil demand growth is close to 0.5% a year in the 2016-2040 time period. It is lower than the last year's projected growth of 0.7% per year in the 2015-2035 time frame. On the other hand, the projection of the demand for gas appears to be in line with the previous predictions, as it is expected to witness 1.6% growth per annum. Big companies like Chevron Corporation, Shell, ExxonMobil Corporation (XOM - Free Report) , which invested in gas production are likely to profit largely from this growth for the coming years.
London-based BP is among the leading integrated energy players in the world. The company’s three major reporting segments include Upstream, Downstream and Rosneft. The downstream operation comprises refining of raw crude along with manufacturing petrochemical products.
BP, carrying a Zacks Rank #3 (Hold), has gained 16.8% last year compared with 6.8% growth of its industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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