According to Michael Cohen, chief U.S. economist for bp, an abundance of change is currently happening in the energy industry.
"Clearly, over the course of the past 150 years, the energy system has been predicated on cheap and abundant fuels, and all of that is getting turned on its head," Cohen said. "Right now, and over the course of the next 30 years, we see electrification happening across all different segments of the energy system."
Discussing the insurgence of electric vehicles (EVs) in global markets during CERAWeek by S&P Global, Cohen said bp is ensuring that it is ready for that transition by taking a three-pronged approach.
"No. 1 is convenience and mobility, No. 2 is low-carbon energy, and No. 3 is resilience and hydrocarbons," Cohen said.
The convenience and mobility segment supplies roughly a quarter of the EBITDA growth after 2030, Cohen explained, and part of that is on the "very clear focus" of electrification.
"We've increased our target points on the major markets that we're in, most of that being in India, Europe and China. We're also ramping it up in the U.S.," Cohen said. "The reason we are focusing on that is because we see fleets as being a key part of our strategy, especially in the U.S. All of the market insights we see have those fleets ramping up 10 times over the past 10 years, and we see it ramping up another 10 times over the next 10 years. We see that as a way of supporting our growth."
For bp, Cohen said, that's the big picture.
"We have our focus on fleets and, going forward, there's clearly going to be more diversity in the different types of geographies where we operate. In the U.S., there are definite geographies where the transition is not happening that quickly," he said. "But we have the market insights in other parts of the world to help us make better decisions about how we ramp that up in the U.S."
In terms of traditional fuel consumption, Cohen referenced three scenarios that point to how long demand may increase.
"We have a rapid scenario that sees at least a 70-percent emission reduction in line with a Paris Accord scenario," Cohen said. "That rapid scenario sees oil demand plateauing in the 2020s. Likewise, there is a net-zero scenario that sees a bit of a sharper bend downward sooner, and then there is a business- as-usual type scenario."
Cohen admitted that while some models are useful, some models are simply wrong.
"But they do give us a range of opportunities and a range of possible oil demand," he said. "When we look at oil demand, it's not just about transport. Half is transport. Some smaller share of that – about 50 percent – is passenger cars. We need to see the fleet start to turn over."
The point, Cohen said, is that it's not just about electrification.
"It's about vehicle efficiency standards ratcheting higher across all geographies, even in the U.S.," he said. "We're seeing those policies in China and India to a lesser extent.
"It's all about the efficiency of the vehicles and how the original equipment manufacturers – even if they're not selling EVs – are selling an incrementally more efficient vehicle each year. I'm not saying that just for the passenger car segments; it also applies to the other segments of world transport."
A look beyond the transportation segment reveals that efficiency is increasing, Cohen said.
"Energy intensity and oil intensity continue to improve every single year, and we see this plateauing after an inflection, post-pandemic," he said. "We see the plateau in oil demand happening across all of our scenarios in that late 2025-to-2030 timeframe."
Cohen remarked that as the industry moves through this widespread instability, the important thing to understand is that there's still a need for "resilient hydrocarbons."
"Broadly speaking, we see a decline in the existing base of oil and gas supply across all of the scenarios," he said. "Whether you're talking about India or China, there's a need for natural gas.
"That's why bp is focusing on resilient hydrocarbons. We are also ensuring that those hydrocarbons reduce their carbon intensity over the course of time."
