The Russian invasion of Ukraine will reduce demand for oil and natural gas and speed up the transition to cleaner products, according to oil giant BP. BP, in its annual energy outlook, said it’s now forecasting 2.3% less consumption for energy in 2035 than it did a year ago, as declines for natural gas, oil and coal will be partly offset by increases fornuclear and renewable energies.
BP’s ‘new momentum’ scenario reflects the current broad trajectory of the world’s energy system.
The invasion has led to heightened energy security concerrns. “The increased focus on energy security triggered by concerns about energy shortages and vulnerability to geopolitical events is assumed to cause countries and regions to strive to reduce their dependency on imported energy and instead consume more domestically produced energy. It also gives greater incentive to improve energy efficiency, reducing the need for all types of energy,” BP said. BP also said higher food and energy prices have contributed to a sharp slowing of global economic growth, which it expects to persist for several years. And the war will “reduce somewhat” the pace of global integration and trade. BP
also is assuming a persistent reduction in Russian exports of hydrocarbons. “In the near term, this reflects the impact of voluntary and mandatory sanctions on Russian energy exports. Further out, it stems from the assumption that sanctions affecting Russia’s access to foreign investment and technologies ease only gradually,” said BP. The lead West Texas intermediate contract
was trading above $79 per barrel on Monday, having dropped 38% from its March peak of $130.50.